Use

Cost center planning is a component of short-term business planning. Short-term refers to a planning horizon for the duration of a fiscal year. In short-term business planning, you create the following sub-plans:

The planning process combines the individual planning areas into an integrated planning network.

The following figure shows how the individual planning areas are linked to one another.

Sales Plan

The starting point for short-term planning is the sales plan. It establishes the quantities to be sold in the planning period. Generally, the sales plan is created by Sales and Distribution (SD) and Controlling (CO). The plan sales volumes are forwarded to Production Planning (PP) because this module reconciles plan capacities and activities.

Master Production Schedule

The master production schedule is worked out in close coordination with the sales plan. The master production schedule determines both the capacities and the quantity requirements for raw materials and operating supplies. The plan activities established here are forwarded to the cost centers which must supply these capacities in the form of units of activity. Moreover, the cost center managers must plan the costs to be incurred and the activity quantities to be taken from other cost centers based on the plan capacities and activities.

Cost Center Plan

Cost center planning consists of the following areas:

Together with sales planning, cost planning is the starting point for sales and profit planning.

Sales and Profit Plan

You can calculate revenues based on the planned sales volume and prices, from which the plan contribution margins can be derived. To do this, the revenues are compared with the plan costs.

Financial Budget

Interdependencies exist between cost, sales, and financial planning. The financial planning can trigger a restrictive effect on production planning and cost center planning.