What is cost center

please tell me about
COST CENTER in sales & distribution

hi venu,
  Cost centers are divisions that add to the cost of the organization, but only indirectly add to the profit of the company. Examples include Research and Development, Marketing and Customer service. A cost centre is often identified with a speed type number.
Because the cost center has a negative impact on profit (at least on the surface) it is a likely target for rollbacks and layoffs when budgets are cut. Operational decisions in a contact centre, for example, are typically driven by cost considerations. Financial investments in new equipment, technology and staff are often difficult to justify to management because indirect profitability is hard to translate to bottom-line figures.
Business metrics are sometimes employed to quantify the benefits of a cost centre and relate costs and benefits to those of the organization as a whole. In a contact centre, for example, metrics such as average handle time, service level and cost per call are used in conjunction with other calculations to justify current or improved funding.
I have taken this definition from wiki for your reference.
Regards....
Arun.
Reward points if useful.

Similar Messages

  • What is Cost Center and Activity type

    Can any one make me understand Conseptually, what is Cost Center and Activity Type

    <b>Cost Center:</b>A cost centers is an organizational unit within a controlling area that represents a clearly delimited area of responsibility where costs are monitored against a budget.
    Cost centers represent areas of responsibility (management areas) that generate and influence costs.
    Cost centers are the locations at which the costs are incurred
    <b>Activity types</b> describe activities produced by a cost center. They are measured in units of time or quantity. Activity quantities are valuated using a price.
    For example: the maintenance department provides maintenance service at a labor hourly rate of SAR 2000 or USD 1000.
    When the activities produced by a cost center are used by other cost centers, orders or projects, this means that the resources of the sending cost center are being used by the receiver objects.
    By recording the planned and actual quantities consumed, you reallocate cost incurred on the sender into the receivers.
    Activity Types can be grouped to facilitate reporting and cost allocation.
    Hope it clears your basic doubt on Cost center and Activity type
    Assign points if helpful.
    Regards,
    NareN.

  • What is cost center number?why it is 13 character long?

    Hi ALL
    What is cost center number?why it is 13 character long?
    Please suggest on this
    Thanks & Regards
    Sameer Khan

    hi,
    cost center is an area in the business were the price for the product can be fixed and all finance related data were accessed.
    we are maintaining the length as 10 . hence not mandatory to have 13.
    Ramesh

  • Cost Center value

    Hi all
    Can any one  explain me one thing in same connection of cost center
    At what time cost is captured at cost center in the below flow, please correct me if I am wrong
    At the time of GR
    Material A/C Dr
    To GR/IR
    At the time of IR
    GR/IR Ac Dr
    To vendor
    Issue material  to production order
    Material Consumed
      To Material
    Received from Production order
    Finish Good Inventory A/c Dr
    To cost of finish good  cr
    At the time of PGI
    COGS
    Finish Good Inventory
    At time of billing
    Customer A/C Dr
    To Revenue
    Now at what level cost center is effected im not able to understand.
    Please clear my doubt. because in every place i find orders (in purchase and sales order).
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    Thanks in advance
    Shyam

    Thanks for reply,
    as you told that Cost Centers are normally used for Overhead cost management, while direct material costs in production environment do not flow via Cost Centers.
    So can you please tell me what is difference beteween Cost center and order, as both are use for capturing costs
    Regards
    Shayam
    Edited by: Shayam_210 on Oct 20, 2009 12:36 PM

  • Cost Center Structure at a University.

    Hello all,
    At the university I am working for here is what there Cost Center naming convention appears:
    They use all 10 digits and this is how it is broken down---
    XXX                                XX                    XX                      XXX
    College/Major Unit           Department     Division               User defined.
    of Associate VP
    I don't have a problem with trying to make a cost center name smart but in their Standard Hierarchy they only have ONE cost center group with 5,513 cost centers listed.  It's almost like they have created a second level Chart of Accounts within the Cost Center structure because of the last 3 digits are "user defined".
    This seems like an inefficient design.  can someone shed some light on how other Public Acocunting organizations have set up their Standard Cost Center Hierarchy?
    Under Cost Center groups they have created 1,316 groups. 
    I really think they have tried to take the Cost Center structure to a level that is way too low.  They actually have Cost Centers whose lase three characters are abbreviations of the name of the person managing the spending in that cost sencter.
    Edited by: Daniel Goodhart1 on Mar 3, 2010 10:42 AM

    Hello,
    There is no point in going with only one cost center group. It is meaning less.
    However, you can suggest to create a structure with second and third one XX XX as two nodes. If not possible at least either second one XX or third one XX should be made as a cost center group. This will not only helps them in proper reporting, but also, the consultant in removing the redundancy of the configuration.
    Regards,
    Ravi

  • Funtional Area different to the one of the cost center

    Hi!
    I have a problem when i run tcode AB01.
    The problem is that in one fixed asset the funtional área generated in the finaltial document does not correspond with the one that is related with the cost center, insted of that it post the one related with the fixed asset wich is not correct...
    I run again the t code but now the tcode but now it generates me the correct functional área.
    I am afraid that this could happend again..
    Do you know what could happend to generate this incorrect funtional área?
    Thanks in advanced.

    Hi amit;
    Please see below
    What is cost center used for in Oracle EBS?
    http://download.oracle.com/docs/cd/A60725_05/html/comnls/us/per/orgrp02.htm
    Hope it helps
    Regard
    Helios

  • Cost Center , Cost element , GL Accounts , Cost sheet , Account Assignment

    Dear Experts,
    Please explain what are Cost Center , Cost element , GL Accounts , Cost sheet , cost component and structure, Account Assignment and  how they are interlinked with each other with transactions.
    Thanks,
    Ram

    Dear,
    Cost element : A cost element classifies the organization's valuated consumption of production factors within a controlling area. A cost element corresponds to a cost-relevant item in the chart of accounts.
    Primary cost element: A cost element whose costs originate outside of CO and accrual costs that are used only for controlling purposes
    Secondary cost element: A cost element that is used to allocate costs for internal activities. Secondary cost elements do not correspond to any G/L account in Financial Accounting. They are used only in Controlling and consequently cannot be defined in FI as an account.
    Cost Center: An organizational unit within a controlling area that represents a defined location of cost incurrence.
    GL Accounts : GL Accounts is master data preparation which is assign to chart of accounts.
    Costin Sheet : The costing sheet integrates all elements of overhead costing. In costing sheet calculation base, cost element & Overhead rate & credit are define.
    cost component and structure :
    Cost component - Makes the costs of a material, an activity type, or a process transparent & Groups the costs of a material according to the requirements for material valuation and profitability analysis
    cost component structure : It is use for
    Activity prices for an activity type
    Cost of a process
    Planned cost of a product
    Material costs passed on to material valuation as the standard price or inventory price
    Cost of goods manufactured passed on to Profitability Analysis
    Account Assignment : It's use for direct posting. In this we have to assign GL which is required to post directly.
    GOPAN

  • University Cost Center structure

    Hello all,
    At the university I am working for here is what there Cost Center naming convention appears:
    They use all 10 digits and this is how it is broken down---
    XXX                               XX                       XX               XXX
    College/Major Unit /         Department     /    Division    /   User defined.
    I don't have a problem with trying to make a cost center name smart but in their Standard Hierarchy they only have ONE cost center group with 5,513 cost centers listed. It's almost like they have created a second level Chart of Accounts within the Cost Center structure because of the last 3 digits are "user defined".
    This seems like an inefficient design. can someone shed some light on how other Public Acocunting organizations have set up their Standard Cost Center Hierarchy?
    Under Cost Center groups they have created 1,316 groups.
    I really think they have tried to take the Cost Center structure to a level that is way too low. They actually have Cost Centers whose lase three characters are abbreviations of the name of the person managing the spending in that cost sencter.
    Edited by: Daniel Goodhart1 on Mar 3, 2010 11:50 AM
    Edited by: Daniel Goodhart1 on May 28, 2010 2:24 PM

    Hello,
    There is no point in going with only one cost center group. It is meaning less.
    However, you can suggest to create a structure with second and third one XX XX as two nodes. If not possible at least either second one XX or third one XX should be made as a cost center group. This will not only helps them in proper reporting, but also, the consultant in removing the redundancy of the configuration.
    Regards,
    Ravi

  • Search Help for Cost center

    Hi All,
    I have 2 questions
    1) we dont have any default cost center maintained any where in the org-structure (PPOMA_BBP), howeverwhenever I go for shopping I can see a cost center  along with GL account, ( I know GL acct is coming from "determine GL account for prod-cat" settings in IMG), but what about cost center where is it coming from ??
    2) second, when we do search help for cost center's in shopping application, we are able to see all cost centers from the back end which I guess is good, but we can see even those cost centers which are blocked!!!, why is this happening ??,
    Thanks.

    Hello,
    For First::
    In general the CO Area (here: cost center) is derived from R/3 Backend Enterprise
    Structure and should be re-determined if another acc. objects is
    entered that belongs to a different CO Area. Please also check the
    settings in R/3 Backend IMG, path:
    ->Enterprise Structure ->Assignment ->Controlling
    ->Assign company code to controlling area
    The company code is assigned to the CO Area through the following
    assignment:
    ->Materials Management
    ->Assign purchasing organization to company code
    The CO Area is in general the organizational object in
    highest (CO) level. Assignments to other MM/CO objects are located
    in lower Enterprise hierarchy level. Hence, the CO Area does not
    change if a different CO object of a lower level (here: cost center)
    is assigned to a SRM document.
    For Second::
    The only possibility I see is to set the message to error message in
    the customizing in the backend. The message number is KI 170. When you
    look at the long text of this message in transaction SE91 in the
    backend, you will find the description where to look in the customizing.
    When you have set this message to ERROR, then no purchase order will be
    created in the backend. Instead the shopping basket gets the status
    'ERROR' and the administrator will recieve a work item in his inbox.
    Then he can check the backend and either post the purchase orders again
    after solving the problem, or he can delete the shopping baskets.
    Please check the note for more infos or the documentation.
    Setting the message KI 170 to error message will solve your problem.
    See note 333136.  I would think that if you create
    a PO directly in the backend if you do not have the message configured
    as and error you will be able to create the PO.
    I hope this information helps.
    Kind regards,
    Gaurav

  • What is the impact of business area and cost center in the sales document

    Hi all
    I have small doubt regarding what is the impact of bussiness area and cost center in the sales document... what is the uses of these (bussiness area, cost center) is help full for sd module
    can any one reply plz....
    Thanking you

    Hi,
    Business Area determines where the revenue should be allocated when you sell a material or a service.
    For eg: If your customer is in say Mumbai and he is ordering for a service in Delhi (say DIAL - Delhi International Airport Limited) then based on the terminology.
    Your customer would belong to B Basis Business Area - WHERE THE REVENUE IS COMING FROM or WHERE YOUR CUSTOMER BELONGS TO (SALES OFFICE).
    Whereas your DIAL sales will belong to A Basis Business Area - WHERE THE REVENUE IS GOING TO.
    Cost Center would determine where your allocate your cost to.
    Say Rounding Off can be used as a cost element, because some sort of revenue is lost when figures are roudned off..
    Hope it clarifies your doubt.
    Reward points if satisfactory
    Regards
    Ravi.D.Mansharamani

  • What is the highest node in Cost Center Hierarchy.

    hi SAP gurus,
    can anybody tell me what is the highest node in Cost Center Hierarchy.
    thanks

    Hi,
    In Cost Centre Hierarchy highest node is Operating concern -> controlling Area
    Hierarchy of controlling is-
    Client
    Operating Concern
    Controlling area
    Company codes
    Business Areas
    Rgds
    shekar
    hi SAP gurus,
    can anybody tell me what is the highest node in Cost Center Hierarchy.
    thanks

  • What is the T-Code for creating Cost center - profit center standard hierar

    Hi,
    What is the T-Code for creating Cost center - profit center standard hierarchy.Please provide me the T-codes.
    Thanks

    Hi Supriya,
    Create / Change Cost Center Standard Hierarchy - OKEON
    Display Cost Center Standard Hierarchy - OKENN
    Create Profit Center Standard Hierarchy - KCH1
    Change Profit Center Standard Hierarchy - KCH5N
    Display Profit Center Standard Hierarchy - KCH6N
    Srikanth Munnaluri

  • For display budgeted amount in cost center what is table in sap?

    For display budgeted amount in cost center what is table in sap?

    Hi,
    Is it budget or planning ? Budget is in BPJA; while planning is mainly in COSS, but also in COSP.
    Regards,
    Eli

  • What is the relation between COST ELEMENT , COST CENTER n CONTROLLING AREA

    Hai can any one help me in understanding what is the relationship between COST ELEMENT
    COST CENTER and CONTROLLING AREA. and what actualy they explain me from basics.
    thank's in advance.

    Hi
    Go through the link given below :
    Cost Center , Cost element , GL Accounts , Cost sheet , Account Assignment
    http://wiki.answers.com/Q/What_are_cost_centre_accounting_and_cost_element_accounting_in_SAP_controlling
    Controlling Area
    With Regards
    Nikunj Shah

  • What is Budjet, Profit, Work and Cost center means?

    Hi Guys,
    Can u explain Budjet center, Profit center, Work center and Cost center? Also if i miss any other center like these!
    What is the functionality of each in business point of view?
    If possible with an example:-) 
    Thanks,
    Vinod.

    Hi.
    Please use a search enginge before aksing here. BTW: If you use a search engine perhaps it is advisable to write 'budget' instead of budjet.
    And before I forget this I would like to point out that your question is not related to ABAP. Therefore this forum is not the right place to ask it anyway...
    Thread will be locked.
    Jan Stallkamp
    Edited by: Jan Stallkamp on Jul 23, 2008 1:18 PM

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