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.
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.
You must specify one of the following allocation methods for source cost centers:
| Allocation methods | Description |
|---|---|
| None | No allocation is needed, so no target cost centers are defined. This is the default allocation method. |
| Equal Distribution | Costs are equally distributed to the target cost centers. You do not specify the distribution percentage for the target cost centers. |
| User-Defined Percentage | You must specify the distribution percentage for each target cost center. The total distribution percentage among the target cost centers is not required to be 100 percent, but cannot exceed 100 percent. |
When you create source cost centers and target cost centers, consider the following points:
- 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 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.
Note
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.
This section describes the following tasks:
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