What is a Cost Center in SAP | How to Create Cost Centers in SAP

SAP tutorials guide you what is cost center in SAP controlling and how to create cost centers in SAP CO using transaction code KS01.

What is a cost center in SAP

Cost center in SAP is a location where the costs are occurred inside the organization. In SAP cost center is the lowest organizational unit in controlling enterprise structure.

Cost centers are responsibility areas for costs within organization and used to capture actual costs of an organization. Costs can can be captured as per department wise, product wise, area wise, responsibility person wise, etc. Assigning the costs to cost centers determines where the costs are incurred within the organization. Each cost center in SAP can belong to one or more cost center groups.

Here we are going to configure the following costs centers in SAP.

Cost CenterDescription
TK01TRNSTransportation
TK01PACKPacking
TK01FACAFactory Admin
TK01SDSTSelling & Distribution
TK01PGENPlant general
TK01HRMHuman Resource

Recommended configuration : – Before you create cost centers, you need to assign standard hierarchy in controlling area using transaction code OKKP or you will get an error as Controlling area TK01 does not have a standard hierarchy (please assign one).

cost center standard hierarchy in SAP

How to create cost centers in SAP

You can create cost centers in SAP by using one of the following navigation method.

Transaction code : – KS01

SAP path : – Accounting > Controlling > Cost center accounting >> Master data > Cost center > Individual processing > Create.

Step 1 : –  Enter SAP Tcode “KS01” in the SAP command field and enter.

Step 2 : – Now the system asking for entering the controlling area for which you like to create cost centers in SAP.

creation of cost center set controlling area sap

Step 3 : – On create cost center initial screen, update the following details

  • Cost Center : – Enter the new key in the field cost center that you like to create in SAP.
  • Valid From : – Update the valid period of cost center in SAP
  • After entering the new cost center key, press enter to continue.

create cost center in SAP initial screen

Step 4 : – On create cost center basic screen, update the following details.

  • Name : – Enter the name of cost center that identifies in SAP
  • Description : – Update the descriptive text of cost center
  • Person Responsible : – User id that responsible for cost center.
  • Cost center category : – Choose the cost center category from the list that applicable for cost center.
  • Business Area : – Choose the business area key for cost center.
  • Currency : – Update the currency of cost center.

Create cost cost center in SAP

Click on save button and save the configuration details. Similarly create other cost center in SAP as per organizational requirements.