Primary Cost Component Split

Definition

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 indicated as such in the cost estimate rather than being included in the secondary cost element for the activity allocation.

Use

The primary cost component split can be created in a cost estimate with or without a 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 broken down 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 break the costs down into fixed and variable costs.

This graphic is explained in the accompanying text.

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 process to the cost components, which enables you to see the composition of the 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 how the costs for a product may develop in the future. 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. This enables you to break down certain activities into their primary costs only partially, or report them as secondary costs.

Integration

The primary cost component split in costing requires the use of the primary cost component split created in Cost Center Accounting when calculating the activity price.

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.
Manually-created cost component splits are included when creating the primary cost component split.
It is also possible to update the standard price in the material master via the primary cost component split.