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Cost Elements:

There are two types of cost elements primary cost elements and secondary

cost elements. The primary cost elements are used to take external postings

(from FI and/or MM) whereas the secondary cost elements can take postings

only within CO and are used mainly for assessments, distributions,

settlements, etc.

You can extend the GL accounts and create primary cost elements.

You can create secondary cost elements ONLY in CO.

To be able to post to a primary cost element, you need to have the

corresponding GL account. Also, you need a cost carrying object such as a

cost center to identify the origin of these costs. Examples of primary cost

elements are material costs and salary costs.

Secondary cost elements are used exclusively in CO to identify internal cost

flows such as assessments, distributions, settlements, etc.

When you analyze revenues in cost controlling, the R/3 system records them

as revenue elements. Revenue elements are primary cost elements.

When you create a cost element, you should assign a cost element category.

This category defines the transactions for which the cost element is valid.

Cost Center Hierarchy:

Cost elements are locations where the costs have occurred. You can set up

cost centers based on functional requirements, geographical locations,

distribution criteria, and/or areas of responsibility.

You create cost center hierarchy (CCH) by combining similar cost centers

into groups. Each node in the CCH represents a node.

Activity Types:

Activity types are tracing factors for cost allocations. Internal activity is

allocated via secondary cost elements.

Statistical Key Figures:

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SKFs can be a number of things such as the number of employees, the

length of telephone calls, the # of PCs, etc.

SKFs act as the tracing factors for periodic transactions such as distributions

or assessments, and for key figure analysis.

We can define SKFs as a fixed value or as a totals value. Fixed values do not

change from period to period, whereas totals value changes every period

(and the total value at the end of the relevant period is considered for cost

allocations purposes).

Time-dependent Master Data

We can also specify time-dependent master data in the master record of the

cost elements, cost centers and activity types. An example would be the

person responsible for the cost center.. we can specify that the person

changes after a specific date and the system will allow us to create 2

database records for the same cost center with 2 different people for these

dates.

Postings to Cost Centers

Cost and revenue postings in CO can trigger subsequent postings. Thesesubsequent postings can either be true (real) postings or statistical postings.

The true postings get the actual postings whereas the statistical postings

dont. We use the statistical postings only for informational purposes.

When you specify a cost center in an FI posting (for example, in a vendor

invoice posting), the CO posting is a true posting. The R/3 system transfers

the profit center from the master record of the cost center. THE PROFIT

CENTER ALWAYS GETS THE STATISTICAL POSTINGS.

EXERCISE 1:

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Create a Miscellaneous cost center group. Create 3 cost centers

MISC1, MISC2 and MISC3 and assign them to the Miscellaneous group.

Create this group in the present CCH.

Create 2-3 secondary cost elements. At the end of the period, you

want to move the costs from the MISC1 cost center to the other cost

centers MISC2 and MISC3. The creation of these secondary cost

elements will facilitate the assessment process.

Create a miscellaneous GL account to enable miscellaneous postings

such as telephone bill, cable bill, etc from FI. Post a vendor invoice

(FB60) for cable bill in the amount of $5000.00 to the MISC1 cost

center.

Now, display the balance in the cost center MISC1 to make sure this

transaction was actually posted to the cost center.

Now, distribute this amount to cost centers MISC2 and MISC3 equally.

EXERCISE 2:

Post another vendor invoice (FB60) for the telephone bill for the

amount of $300.00 to the MISC1 cost center.

Display the line balances in the MISC1 cost center to make sure this

transaction was posted properly.

Create SKF # of telephones to be used as a tracing factor to post

the telephone bill to the MISC2 and MISC3 call centers. The SKF value

for MISC2 is 10 and for MISC3 is 20.

Use the assessment/segment cycle to distribute these costs to the cost

centers in the apt proportions.