cost element

[Former Member]

what is primary cost element and secondary cost element, and deferance between them?

[Former Member]

Hi

Primary cost elements are like materail costs, personnel costs, energy costs...

where a corresponding GL account exists in FI..to allow costs to flow...

Primary Cost Element Catogory : 1

Revenue Cost Element Catogory :11

Secondary cost elements are like production costs, material overheads, production overheads, they can be created and administered in only CO. These are used in internal cost allocation, overhead calculation, settlement transactions., it does not flow to FI...

Secondary Cost Element Catogory:

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.

Regards

[Former Member]

thanks for yor kind reply

regards,

Annavaram

[Former Member]

posting with primary cost elements are made cost carrying controlling object such as cost centers or internal orders .

example :- primary cost elements are material cost , salary , wages etc .

and secondary cost elements used exclusively in co to identify internal cost flows such as assesment and settlement , they dont have corresponding FI G/Ls and ore only defined in controlling .

sachin

[Former Member]

Thanks for your kind reply

regards,

Annavaram