Creation of Cost Center in SAP MM

Creation of Cost Center


• Controlling provides information for management for decision-making.

• If facilitates co-ordination, monitoring and optimization of all process in an organization.


• Organizational Unit within a controlling area that represents a defined location of cost incurrence is called Cost Center

• Tcodes for Creation of Cost Center are

o Define Standard hierarchy - OKKP

o Creation of Cost Center - KS01

o Creation of Cost Element - KA01


• Cost Elements Describe the origin of costs.

• Cost element classifies the organization-valuated consumption of production factors within a controlling area.

• Primary Cost Elements

o Primary cost elements are used for direct posting and must be accompanied in GL a/cs in FI.

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• Creation of Std. Hierarchy for Cost center

SPRO -> Controlling -> General controlling -> Organization -> Maintain  Controlling Area

- Click Position and enter your controlling area

- Select your controlling area and click details button.

- Enter the field Cost Ctr. Std Hierarchy with some hierarchy name.

- Click save button.

  •  Creation of Cost center

SPRO -> Controlling -> Cost center Accounting -> Master data -> Cost center -> Create Cost center

- Set Controlling Area to our controlling area.

- [On menu bar -> Extras -> Set Controlling Area]

- Enter Name, Description, Person responsible, Cost Center Category as F for production, Std. Hierarchy, Business Area as 0001 and Currency INR and click save button.

  • Creation of Cost Element

SPRO -> Controlling -> Cost center Accounting -> Master data -> Cost Elements -> Create Cost element

  •  Set Controlling Area to our controlling area.[On menu bar -> Extras -> Set Controlling Area]m

Enter Cost Element as 400000 and valid from date and in basic data tab enter name and

description and cost element category as 1 (1 for Primary cost/cost reducing revenue)