Examples of Setting Up a Cost Organization Structure

The following examples illustrate cost organization structures that support different cost accounting needs.

Example 1

Set up three inventory organizations to optimize materials management across three different locations. Because they all belong in the same business unit and are managed by one cost accounting department, you could group them under a single cost organization; or you could assign each inventory organization to its own cost organization and then assign all three cost organizations to the same business unit.

Example 2

Three inventory organizations are geographically dispersed, or have autonomous managers responsible for the location's profits for internal management purposes. Create three cost organizations, and assign each inventory organization to its own cost organization.

Example 3

Four inventory organizations are geographically dispersed, or have autonomous managers responsible for the location's profits for internal management purposes. Two of them fall under one business unit, and two fall under another business unit. You could group the inventory organizations under two cost organizations corresponding to the two business units; or you could assign each inventory organization to its own cost organization.

Example 4

Two inventory organizations in the same business unit need to share a single average cost for some items. These inventory organizations must belong to the same cost organization.