Cost Center Planning (CO-OM-CCA)
Purpose
Cost center planning involves entering plan figures for costs , activities , prices or statistical key figures for a particular cost center and a particular planning period. You can then determine the variances from these figures when you come to compare these plan values with the costs actually incurred. These variances (see: Variance Calculation ) serve as a signal to make the necessary changes to your business processes.
Cost center planning forms part of the overall business planning process, and is a prerequisite for standard costing. The main characteristic of standard costing is that values and quantities are planned for specified timeframes, independently of the actual values from previous periods.
You can take plan costs and plan activity quantities to determine the (activity) prices. These prices can be used to valuate internal activities during the ongoing period, that is, before the actual costs are known.
Cost center planning has the following objectives:
To plan the structure of the organization’s future operations for a clearly defined time period.
You should define performance targets and target achievement grades. You must consider the internal and external (market) factors affecting your organization.
To control business methods within the current settlement period.
This ensures that you keep as closely as possible to the plan. Iterative planning lets you adapt the target performance to reflect any changes in the organizational environment.
To monitor efficiency after completion of the settlement period using plan/actual or target/actual comparisons.
To provide a basis for the valuation of organizational activities, independent of random fluctuations.
For more information, see:
Short-Term Organizational Planning
Reconciliation of Cost Center Planning With Other Applications