A cost center in SAP is an organizational unit (department, production line, work position…) where the costs are allocated.
Cost centers can be grouped for different purposes. For example, if we have several cost centers in a department, we can group them to obtain the total cost fpr that department. Also, define groups may be useful to simplify the selection of cost centers when executing reporting transactions or to define assessment cycles.
A tree structure can be defined in SAP to create a cost center hierarchy. Hierarchy and cost center groups are related concepts, as each node of the hierarchy has to be a group.
Below you can see an example of a hierarchy created in KSH1/OKEON for the fictitious company “Under Controlling Ltd” defined in this post.
This hierarchy has four levels: the company (main node in blue), type of department (nodes in dark orange -level 2-), departments (nodes in light orange -level 3-); and finally, the cost centers (in white -level 4) as a basic cost collectors.
