Considerations for Setting Up the Cost Organization Structure

Set up your cost organization structure to accommodate your costing and accounting needs. The following discusses considerations for creating cost organizations, their association with inventory organizations, and their assignment to cost books.

Considerations for Creating Cost Organizations

When deciding what cost organizations to set up, consider the following:

Financial reporting and responsibility accounting. A profit center business unit may contain one or more cost organizations depending on use case requirements.
Data security needs. The cost organizations that you create may be determined by the separation of duties and security requirements for your users.

Considerations for Using Cost Organization Sets

By assigning cost organizations to a set, the entities defined at the set level can be shared by all the cost organizations belonging to that set. A cost organization set enables you to streamline the setup process, and helps you avoid redundant setup by sharing set-level definitions of your cost profiles, valuation structures, cost elements, and cost component groups across the cost organizations that belong to the set.

You also have the flexibility to assign cost organizations to different sets, for example if they're in different lines of business. That way you can segregate the definitions that are shared.

Considerations for Associating Inventory Organizations with Cost Organizations

Your operation may lend itself to a simple configuration of one inventory organization to one cost organization. Or, when there are many inventory organizations in the same business unit, you may group several inventory organizations under a single cost organization for any of the following reasons:

Costing responsibilities. You may want to group inventory organizations that roll up to the manager of a profit center business unit, or a cost accounting department within the business unit.
Uniform cost accounting. For example, to define your overhead rules just once and apply them to transactions from several inventory organizations, you can group those inventory organizations into one cost organization.
Cost sharing. If there are items in more than one inventory organization for which you want a single average cost, those inventory organizations must fall under the same cost organization.

Considerations for Assigning Cost Books to Cost Organizations

Every cost organization must be assigned one primary cost book that's associated with the primary ledger of the legal entity to which the cost organization belongs. You may also assign several secondary cost books as needed for other purposes such as: business analysis and management reporting, local currency accounting, or profit tracking of inventory items.

You can also assign cost books that don't have an associated ledger to a cost organization for simulation purposes.