SAP CO - Cost Center

A Cost Center is defined as a component in an organization that adds to the cost and indirectly adds to the profit of the organization. Examples include Marketing and Customer Service.

A company can classify a business unit in three ways −

• Profit center,
• Cost center, or
• Investment center.

The simple and straightforward division in an organization can be classified as cost center because cost is easy to measure.

Cost Center Hierarchy

The hierarchy of a cost center looks as follows −