Creation of Cost Center in SAP MM

22 September, 2020


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Creation of Cost Center


Controlling provides information for management for decision-making.

If facilitates coordination, monitoring, and optimization of all processes in an organization.


The 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

  • Define Standard hierarchy - OKKP
  • Creation of Cost Center - KS01
  • Creation of Cost Element - KA01


Cost Elements Describe the origin of costs.

The cost element classifies the organization-valuated consumption of production factors within a controlling area.

Primary Cost Elements

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. The 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 the details button.
  • Enter the field Cost Ctr. Std Hierarchy with some hierarchy name.
  • Click the 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 the 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 the basic data tab enter name and description and cost element category as 1 (1 for Primary cost/cost reducing revenue)

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