How to Create Secondary Cost Elements in SAP

SAP tutorial explains what is secondary cost element, category and how to create secondary cost elements step by step using transaction code KA06.

What are SAP secondary cost elements

Secondary cost elements are used to transfer costs and revenues within the SAP controlling module, used for mostly allocations and settlements. While creating secondary cost elements in SAP, we need to specify the secondary cost element category. According to the category, cost elements are used for the specific purpose for which it is created. Cost elements are two types i.e. primary cost elements and secondary cost elements.

The following are the important secondary cost element categories are used

21 Internal Settlement : – This category will be used to allocate the costs from one co object to another co object or multiple co objects to multiple co objects. For e.g.

  • Internal order —-> Cost Center
  • Internal Order —> Production Order

31 : Order/ Project results analysis : – This category will be used to calculate the costs in work in progress for semi finished goods and finished goods. For example

  • Work in progress for material cost
  • Work in progress for Overhead cost.

41 : Overhead : – This category is used to calculate the overhead costs that are incurred for the semi finished goods and finished goods. For example

  • Labor overhead costs (Medical expenses, transport expenses, Accommodation, etc)
  • Production overhead (Repairs & maintenance costs, etc)

42 : Assessment : – This cost element category will be used in cost center accounting for allocation of costs from one cost object to another cost object or between multiple cost objects.

  • Enterprise cost center –> Human resource, Finance

43 : Internal Activity Allocation : – This secondary cost element category will be used to capture direct activity costs related to product. For e.g.

  • Labor hour cost, Machine hour cost, etc

Secondary Cost Elements Configuration steps

We are going to create the following secondary cost elements for controlling area TK01.

Cost ElementNameCost Element Category
TKMCHNRSMachine Hours43
TKFOHFactory Overhead43
TKADOHDAdministration Overhead43

How to create secondary cost elements in SAP CO

You can create secondary costs elements in SAP controlling by using one of the following navigation method.

Path : – Accounting > Controlling > Cost element accounting > Master data > Cost element > Individual processing > Create Secondary.

Transaction code : KA06.

Step 1 : – Enter SAP transaction code “KA06” in the SAP command field and enter.

SAP transaction code KA06

Step 2 : – Now update the controlling area key for which you like to create secondary cost elements in SAP.

set controlling area for cost elements SAP

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

  • Cost Element : – Enter the key that identifies the secondary cost element in SAP.
  • Valid date : – Update from and to validity date of cost element.
  • After entering the required details of cost elements, press enter to continue.

create secondary cost element initial screen SAP

Step 4 : – In the next screen create cost element, update the following details.

Name : – Update the name of secondary cost element TKTRANSPRT as Transportation.

Description : – Update the descriptive text of cost element

Item category : – Select the item category for secondary cost element as 43 (Internal activity allocation).

Create secondary cost elements in SAP CO

After maintaining all the required details, click on save button and save the details. A message displays as cost element has been created.

cost element has been created SAP

Now try to create other secondary cost elements in SAP by referring above configuration steps.