BUSINESS BLUEPRINT

Financial Accounting and Controlling

Cost Center Accounting

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 ntents
1. COST ACCOUNTING ..............................................................................................3
1.1. Expectation ..................................................................................................................3
1.2. Description ...................................................................................................................3
1.3. Special Considerations ................................................................................................3
1.4. Solution in SAP ............................................................................................................3
CONTROLLING MASTER ....................................................................................................3
1. Standard Hierarchy ........................................................................................................... 3
1. COST ACCOUNTING
1.1. Expectation

• To ensure that all costs are captured at the “point of incidence”

• To ensure that all relevant costs are accumulated at the respective cost centers

• To compare Planned (budgeted) and actual costs and analyze variances

• To fix responsibility for cost management at all levels in the organization

1.2. Description
This business process outlines the system to capture indirect (non-production related) costs that occur
within an organization. The intention is to ultimately capture all relevant costs at the respective cost
centers and ultimately to load this cost (either in full or in part) onto the product cost. This process also
aims to compare the budgeted and actual costs and analyze the variances.

There are broadly 2 types of costs:

• Direct
• Indirect

Direct costs are the costs that are captured against the production (costs of Raw Materials,
Consumables, packing material etc.)
Indirect costs are the costs that cannot be directly attributed to the production process and hence need to
be captured separately at the cost centers where they originate / occur (for eg. Administration costs,
electricity, water costs at various locations etc.). So at the time of passing entries in Financial Accounting,
the relevant cost centers have to be mandatorily specified. Subsequently at period-end, the costs may be
allocated to the production cost centers and finally to the product cost as overheads.

1.3. Special Considerations

None

1.4. Solution in SAP

CONTROLLING MASTER
1. Standard Hierarchy
Controlling Area must be attached to only one Cost Center group that contains all cost centers sub
groups and cost centers and represents the entire business organization.
Standard hierarchy can be defined with a maximum of 10 alphanumeric characters. We propose “1000”
as the name of standard hierarchy for .
One controlling area would be defined for . Since there is only one controlling area, there would be only
one Cost center standard Hierarchy. The Standard Hierarchy will consist of various cost centers grouped
and sub-grouped under various heads as under:
Following structure will be used for cost centre hierarchy - It is an Example but the cost centres will be
uploaded according to the information received from

2.