Working with cost centers

Cost centers are used to identify which business units to charge costs to. Cost centers can be configured as a hierarchy to allow for cost allocation or the splitting of costs within cost centers. The cost center hierarchy is a source and target relationship (similar to a parent-child relationship where the source is the parent and the target is the child) between cost centers. The target and source relationship defines how the cost for the source cost center is split or allocated to the target cost centers. A source cost center with target cost centers is called a split cost center.

Allocation methods

The source and target cost center relationship is limited to one level. A cost center can be either a source or a target cost center, but not both. You can optionally specify target cost centers for source cost centers, depending on the allocation method.

Before you begin

Read through the following guidelines before you create the source and the target cost centers:

• You cannot use the default cost center ("Unallocated") as a target cost center.
• You cannot use obsolete cost centers as source cost centers or target cost centers.
• A target cost center can belong to only one source cost center.
• Source cost centers cannot be used as target cost centers. For example, a source center cannot be its own target cost center.

You must specify one of the following allocation methods for source cost centers:

You can add target cost centers only after selecting the equal distribution or user-defined percentage allocation method. The allocation value is determined by a percentage from the source cost center. The percentage is stored in the Distribution Percentage field on the Cost Center form for a target cost center.

When the allocation method is Equal Distribution, the Distribution Percentage of the target cost centers is divided equally, based on 100 percent. Distribution percentages are recalculated when a target cost center is added or removed only if the source cost center and the target cost center have a status of Active

For the allocation method of Equal Distribution, the Distribution Percentage is calculated by dividing 100 by the number of active target cost centers related to the active source cost center.

Managing cost centers

This section provides information about the following procedures.

Adding cost centers

1. From the Application Administration Console, click the Custom Configuration tab.
2. From the Application Settings list, choose Foundation> Costing> Cost Center, and then click Open.
3. On the Cost Center form, click the New button in a browser.
   The Cost Center form is displayed. 
4. Select the company for which to add the cost center.
5. In the Cost Center Code field, enter a unique cost center code, such as SPLT-8200 for a split cost center, ENG-2000 for an engineering cost center, or MRT-3000 for a marketing cost center.
   This entry is added to lists for cost center fields.
6. Select a Status.
7. Enter information in the following optional fields:
   • Enter a cost center name and a description.

   • Enter the cost center owner, or press Enter to search for an owner. 

     You must save a new split cost center before you can specify an allocation method and add target cost centers for it.

8. Click Save.

Adding target cost centers

1. From the Application Administration Console, click the Custom Configuration tab.
2. From the Application Settings list, choose Foundation> Costing> Cost Center, and then click Open.
3. On the Cost Center form, search for the cost center to which you want to add target cost centers. See the search information provided in Performing common Foundation tasks.
4. From the list, select the source cost center to which to add target cost centers.
5. In the Allocation Method field, select Equal Distribution or User-Defined Percentage.
6. Click Add. The Searching For Cost Centers dialog box appears.
7. Select search criteria, and then click Search.
8. Select the target cost centers, and then click Return Selected.
9. Click Save.
10. If you selected the User-Defined Percentage allocation method, you must specify the percentage for each target cost center:
    1. Select a target cost center.
    2. Click View.
    3. In the Distribution Percentage column of the Target Cost Centers table, enter the distribution percentage for the selected target cost center.
    4. Click Save.

Removing relationship between cost centers

To remove the relationship between cost centers, select the target cost center in the Target Cost Centers table, and then click Remove.

When you remove the relationship between the source cost center and the target cost center, the existing target cost center becomes a source cost center. You can now add this cost center as a target cost center for another source cost center.

Deleting cost centers

You can delete the cost centers only with the status Proposed. However, if you change the status of a cost center to any other status than Proposed, you cannot delete it. You cannot delete the default cost center, Unallocated.

Select one of the procedures mentioned below depending on your goal.