Cost Center / Profit Center / GL account

Difference between cost center & profit center?

A profit center is the department or division of an enterprise that earns revenue from selling a product or providing a service to either an internal or external customer.
Cost center is the department or division that offers support services to the enterprise without earning a revenue.

Example: A product division of a company, which sells products in the market is a profit center.
Corporate functions of the same company which render support in HR, Admin, or finance are cost centers.

 

A cost center is a subunit of a company that is responsible only for its costs. Example of cost centers are the production departments and the service departments within a factory and administrative departments such as IT and accounting.

A profit center is a subunit of a company that is responsible for revenues and costs. Often a division of a company is a profit center because it has control over its revenues, costs, and the resulting profits.

Cost centers and profit centers are usually associated with planning and control in a decentralized company.

 

Formula :  Sales Revenue - Cost of Sales = Profit (profit center)

 

Relationship between cost centers and profit centers

 

 

How the cost of stanadard parts transfer to COGS ?  ( Goods issue to specific sales order )

Because the standard parts will be the part of BOM of non-std part, the non-std part will be involved in the sales order (configurable material ) -CU52 .

The cost of standard part will go into the cost of non-std part ,then when carry out the settlement for sales order , the sum of cost will be completely settled to COGS .