Seconday Cost element Category Uses and Importance.

[Former Member]

Hi ,

Can any one explain me the seconday cost element uses and importance in cost accounting ?

Especially for the Cost element categories

21-Internal setellment.

42-Assesment.

43.Internal Activity allocation.

32-Order/Project result analysis.

when to use which cost element Category and examples.

I understand in the Cost sheet for the Overhead Calculation we use Seconday CE category 41.

But in the Allocation structure at the time of giving the Cost elements, i will get confused to assign the CE's.

This will be the great help.

[Former Member]

done

[Former Member]

Hi Prad,

21-Internal setellment - This category of cost element is used to settle the costs collected in a cost object to another cost object within Controlling. You cannot settle to FI or any toher Module using this category of Cost Element

42-Assesment

Assessment is a type of allocation of costs from one cost object to another cost object say from one cost center to another cost center.

In case of Distribution, the cost gets allocated using the origical cost elements. hence the origin of the cost will never be lost

But in case of assessment, you need to allocate the costs using a seperate cost element with category 42. In this case, the cumulative cost collected is allocated to another cost center unsing this assessment cost element. Hence the origin of the cost is not retained.

From a business requirement perspective, we need to use distribution for allocating the service costs to real cost centers. After that we need to use Assessments

43.Internal Activity allocation.

Using this type of cost element, we can plan, calculate the prices of activities and obsorb the costs to Production Orders, Service orders etc.

this plays very crucial role in cost obsorption in product costing or sevice costing areas

32-Order/Project result analysis.

One of the most important and complex area in Product costing would be Calculation of WIP/Result Analysis.

We will be able to calculate and settle the WIP or Result analysis value to FI only by using Cost elements created with Category 32

I hope i made it clear to you.

Please let me know if you need futher information in this regard

Surya

[Former Member]

Thanks for the expalanation.

I have one more doubt, regarding the Allocation structure.

Say for example :-PM(Settlement of PM orders) given assessments as

001 Raw material costs

002 Operating costs

003 External procurement

005 Personnel costs

009 Miscellaneous costs

020 Activity allocation

022 Overhead

025 Settlement

030 Consumption Semifinished Prod.

for each of the above Assignemnt mentioned below that , there are

1.Source

2.Assessment CE

3.Setellement CE.

I undersatnd for 1.Source , we will be giving the Primary CE.

for the 2 & 3 wht is the significance and Use of assigning the seconday cost elemts....and itz function....?

[Former Member]

wht is allocation structure and for wht purpose it is used?

[Former Member]

Hi Prad,

Settlement cost element is the one through which you will be settling the costs collected to another cost object. It could be internal or external. In you case (PM Order) i believe it should be internal settlement using Internal settlement cost element category.

Usually, we don't use Assessment cost element in allocation structure. But the meaning of assessment cost element which i mentioned in my previous response holds good

What is Allocation Structure:

1. An allocation structure comprises of the details of source of the costs.

2. shows which cost elements need to be settled to which receivers

3. The settlement can be by using original cost elements or secondary cost elements (either with Category 21 or 22 depending on the requirement)

4. System performance point of veiw: if you choose settlement by settlement cost element, then it needs less system resource than settling using hte original cost element (by selecting "by cost element" check box)

I hope i made it clear.

Please let me know if you need further information in this regard

Surya