Primary Cost Component Splits 

Definition

A report that displays the costs of the internal activities and the process costs broken down into their original production factors. For example, depreciation on production facilities can be included in the cost estimate, and is not encrypted under the secondary cost element for the activity allocation.

Use

The primary cost component split can be created in the cost estimate with and without quantity structure, as well as when costing a sales order. You define the structure of the primary cost components in Customizing for Product Cost Controlling. Typical cost components of the primary cost component split are raw materials, wages, energy, depreciation, and so on. For more information, see the Implementation Guide for Product Cost Controlling under Product Cost Planning ® Basic Settings.

The costs of a product are grouped into primary costs in the same way as the cost component split for the cost of goods manufactured: the costs are collected as cost components, to which you assign intervals of primary cost elements. You can also subdivide the costs into fixed and variable costs.

The primary cost component split is an alternative way of showing the cost of goods manufactured of a product. This cost component split assigns the primary cost elements for the cost center or the process to the cost components, insodoing sending information necessary for setting the activity price for the activity type or the costs for the process.

A feature of the primary cost component split in Product Cost Planning is that it provides an indication of future cost developments of a particular product. Since the amount of labor costs or energy costs of a product is visible, the effects of changes to these costs can be better predicted.

The primary costs from Overhead Cost Controlling can either be transferred directly into the primary cost component split of the product, or assigned to other cost components. In this way, you can explode the costs for specific internal activities partly by their primary costs, and combine them partly as secondary costs.

You can transfer the primary cost component split of the internal activities directly into the cost estimate, or assign it to other cost components. It is also possible to break down certain activities only partially into their primary costs, or report them as secondary costs.

Integration

When determining the primary cost component split for products, the costs for internal activities and process costs (valuated in CO-ABC), with their primary cost component splits from Cost Center Accounting, are included in costing.

See also:

Transfer Structure for the Primary Cost Component Split