cost center planning

[Former Member]

Hello Friends,

Could you please help explain me how primary costs and secondary costs are used in cost center planning?

How does primary relate to the secondary?

I am new to this concept.

Regards

Markus Z.

[Former Member · Accepted solution]

Hi Markus,

primary cost element is link to 1 G/L account, secondary cost elelment doesn't link to G/L account but it can act as a receiver to a group of G/L account through assessment cycle, it also lost accounting trail.

please reward points if found useful.

[Former Member · Accepted solution]

Hi Friends, points have been awarded.

So, can I say primary costs and secondary costs are mutually exclusive of each other whereby they are different things from each other?

For cost center planning, could you kindly tell me the gist of the planning concept from a layman perspective, that is , avoid using R/3-terminology as far as possible? system terminologies can in the begginning confuse greenhorns like me who is trying to appreciate the fundamentals / concepts only.

Thanks.

Regards

Markus Z.

[Former Member · Accepted solution]

you can't say that they are mutaully exclusive of each other, they are different but they can be flexible to use, all depends on the business decision that choose either distribute or assessment.

[Former Member · Accepted solution]

Dear Nancy,

Am I right to say in a cost center planning environment / setup, allocation can only be either assessment or distribution method?

regards

Markus Z.

[Former Member · Accepted solution]

Hi Marcus,

The primary cost a cost is one which is essentially borne out of a GL a/c.Thus the existance of a GL a/c is a must to create a primary cost element for the item in consideration.

The secondary cost is an Engineered cost;in sense a cost element created for the sake of our convinience,to allocate to cost objects etc.For example,WIP [ work in progress] is a secondary cost.The WIP can consist of Raw material,

Direct labour,-these two are primary cost and overheads,say production overhead absorbed on a % basis-this is secondary cost.Thus Primary and secondary cost can co exist and are not mutually exclusive.

The allocation can be in addition to Assmt and Distrbn,can also be done thro'other methods like Indirect activity allocation,etc,for example.

Hope this helps.

Regards,

Ramesh

[Former Member · Accepted solution]

Hi Markus,

no, allocation can be done in reposting cycle as well.

[Former Member · Accepted solution]

Hi Friends,

Thanks Janani, Ramesh and Tracy. Points awarded.

Lastly, i just need to clarify is it true that only one of the allocation methods can be used / chosen ? If more than 1 is chosen, does it mean 2 or more cycles are needed? Is it a 'either or' situation?

Sorry for the novice question. Hope you can help me close this message.

Regards

Markus Z.

[Former Member · Accepted solution]

You can use more than one allocation methods for planning of cost centers based on the business requirements.

You can use 2 or more cycles if required to meet the requirements.

Regards,

Suraj

[Former Member]

Hi Markus,

Please have a look at this link . It has a very elaborate description of your query.

http://help.sap.com/saphelp_47x200/helpdata/en/08/51485643b511d182b30000e829fbfe/frameset.htm

Thanks,

Janani

award points if helpful