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Element
Explain the difference between primary and secondary cost element? With an
example.
Primary cost elements are like materail costs, personnel costs, energy costs... where a
corresponding GL account exists in FI..to allow costs to flow...
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...
Example....
Again cost of goods sold particularly in VAX (make to stock) is not an cost element,
where the same COGS in VAY (make to order) is a cost element. Price Difference
account should not be made as cost element.
In order to find the production order cost, the allocation of cost from sender cost centre to
production order for the operational activities carried on and its cost associated with it,
have to be loaded, hence in CO the cost centre allocate that portion of operational cost to
production order, and this cost is carried by a cost element (since there are no FI
involvement and entries are flowing within CO by crediting sender cost centre and
debiting receiver production order a cost element has to be created.... say "Operational
Cost - Activity" the entry will be
In CO the production order and cost centre are co object including but not limited to.