Dear Sachin
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.
In Material Master, in two tabs, this Profit Center field is there. One is in Sales: General/Plant view and another in Costing1 view.
The following examples demonstrate how you can assign cost centers to profit centers:
=> If you want to divide your company into profit centers geographically, you can generally assign the cost centers of one business site to the same profit center.
=> If you want to divide your company into profit centers according to product groups, it may occur that a single production cost center performs activities for a number of product groups. You might want to assign these cost centers to one profit center (for example, "Production A"). If the cost center then performs activities for a production order, the system credits the profit center "Production A" as well as the cost center. Consequently, only the over-/underabsorption of the assigned cost centers remains in the profit center as a balance at the end of the period. You can then either settle this over-/underabsorption from the cost center (for example, to a profitability segment) or allocate it directly to the corresponding product groups in Profit Center Accounting.
=> It is often not possible to assign administration cost centers directly to a profit center. You might, for example, assign them to a service profit center or an allocation profit center. This profit center would then contain all the administrative costs which occur. At the end of the period, you can then either settle this over-/underabsorption from the cost center (for example, to a profitability segment), with assignment to a service profit center, or assess or distribute it directly in Profit Center Accounting, with assignment to an allocation profit center. In either case, the corresponding profit center is credited at the end of the period.
=> It might be conceivable that you would not assign auxiliary cost centers which are credited at the end of the period to profit centers. However, in this case these costs are updated under a dummy profit center, which makes it more difficult to reconcile Cost Center Accounting and Financial Accounting. It is therefore recommended that you assign each assignment object.
thanks
G. Lakshmipathi
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