Profit center, Cost center and Variant

[Former Member]

Hi Experts,

I have come across Profit center and Cost center. Basically can anybody please explain what is profit center and what is cost center. How are these two related and Influence SD module at Implementation.Please throw some light on this.

what is VARIANT and why do we use vairants especially in SD Implementation.

I really appreciate your instant help.

Regards,

Kanna.

[Former Member · Accepted solution]

Hi Kanna

The Cost Element Accounting component provides information which includes the costs and revenue for an organization. These postings are automatically updated from FI (Financial Accounting) to CO (Controlling). The cost elements are the basis for cost accounting and enables the User the ability to display costs for each of the accounts that have been assigned to the cost element. Examples of accounts that can be assigned are Cost Centers, Internal Orders, WBS(work breakdown structures).

Cost Center Accounting provides information on the costs incurred by your business. Within SAP, you have the ability to assign Cost Centers to departments and /or Managers responsible for certain areas of the business as well as functional areas within your organization. Cost Centers can be created for such functional areas as Marketing, Purchasing, Human Resources, Finance, Facilities, Information Systems, Administrative Support, Legal, Shipping/Receiving, or even Quality.

Profit Center Accounting provides visibility of an organizationu2019s profit and losses by profit center. The methods which can be utilized for EC-PCA (Profit Center Accounting) are period accounting or by the cost-of-sales approach. Profit Centers can be set-up to identify product lines, divisions, geographical regions, offices, production sites or by functions. Profit Centers are used for Internal Control purposes enabling management the ability to review areas of responsibility within their organization. The difference between a Cost Center and a Profit Center is that the Cost Center represents individual costs incurred during a given period and Profit Centers contain the balances of costs and revenues.

What is an SAP variant?

A variant is simply an SAP report where the parameters for running the report have been set by the user and then saved with unique name. This allows future retrieval and execution of the report faster without reentering the parameters. As a convention the variant name should start with with the digits 50 so searchs for LHU variants is easier and quicker. Financial/budget variants should start with your fund center number (which also starts with a 50).

Please check the below link for furthur information

http://help.sap.com/saphelp_nw04/helpdata/en/c0/980374e58611d194cc00a0c94260a5/content.htm

Award if useful to you

[Lakshmipathi]

Dear Kanna

1) Profit Center

A profit center is an organizational unit in accounting that reflects a management-oriented structure of the organization for the purpose of internal control.

You can analyze operating results for profit centers using either the cost-of-sales or the period accounting approach.

All the postings in Financial Accounting, Materials Management, Asset Management and Sales and Distribution and Controlling which affect profits are reflected in Profit Center Accounting.

2) Cost Center

You need to assign cost centers to profit centers so that you can reflect all the primary costs from Financial Accounting and all secondary allocations from Cost Center Accounting in Profit Center Accounting.

The assignment of a cost center also implicitly assigns all the assets which belong to that cost center to the profit center

By assigning cost centers to organizational objects, you determine where costs incurred by the object are to be charged. The inheritance principle applies: If an organizational object is not assigned a cost center, the cost center assigned to the superior object applies.

thanks

G. Lakshmipathi