An organizational unit within a controlling area that represents a separate location of cost incurrence. The definition can be based on functional requirements, allocation criteria, activities or services provided, physical location, and/or area of responsibility.
Cost centers are combined into hierarchical decision, managerial, and responsibility groups.
Cost centers support differentiated assignment of overhead costs to organizational activities based on utilization of the relevant areas (cost determination function) and for differentiated monitoring of costs arising in an organization (cost controlling functions).
Cost centers can include activity types, which categorize the specific activities undertaken by cost centers.