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Defining cost allocation

Menu path

System ➔ Finance ➔ Cost centres / units ➔ Cost allocation

Introduction

Cost centers and cost units are commonly used when managing cost allocations within an organization to gain a better insight to how the costs are divided in the organization. You can apply the cost allocations effectively if you have a well-defined allocation level for each of the respective cost centers. Costs can be allocated from a cost center with a lower allocation level to other cost centers with higher allocation levels. For example, you can allocate the cost from a cost center with the allocation level one to a cost center with the allocation level two or higher. However, a cost allocation is not allowed for a main cost center (the cost center with the highest allocation level among all cost centers created), unless another cost center with a higher allocation level is created. The highest permitted allocation level is “99”.

In this screen, you can select a cost center from the overview displayed, and then allocate the cost from the selected cost center to other cost centers with higher allocation levels. Next, you need to process the allocation by cost center at Finance ➔ General ledger ➔ Cost centres / units ? Process, so that the allocated cost can be distributed to the respective cost center(s) accordingly. For more information, see Processing cost allocation.

Note: It is possible that not all columns in this example are displayed. You can add or delete columns as required. For more information, see Inserting and deleting columns.

What version are you using?

The information in this document is applicable to product update 407 and higher. If you have versions lower than this, certain features explained here will not be applicable.

How do I allocate a cost to a cost center?

  1. In the overview of cost allocation, and select a cost center to which the cost will be allocated.
  2. Click Allocate.
  3. In the Allocate cost centres screen, click Insert.
  4. Next, click the Browse icon at the Cost centre field.
  5. In the Cost centres screen, a list of cost centers with higher allocation levels will be displayed.
  6. Define the search criteria, and then click Search.
  7. Select the relevant cost center and click Select.
  8. Define the Units field, and then click OK.
  9. Click Close.

Keep in mind: Before you can allocate the cost to a cost center, you must create the cost center and define the allocation level at Allocation level under the Cost allocation tab of the Cost centres screen (go to System ➔ Finance ➔ Cost centres / units ➔ Cost centres, and then click New). For more information, see Creating and maintaining cost centers.

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 Assortment:  Date: 26-09-2022
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