The Cost Source can be seen as the origin of the cost (or where the cost was raised). All cost sources are user defined. To be able to enter cost sources, it is essential that you understand how the company wants to follow up on its costs. For example, if the company wants to follow up on its labor costs per department (labor class), you might need to enter each department as a cost source.
You can use the Mandatory to Use Cost Sources option on the Cost Source page header, to make it mandatory to use cost sources in the system. You can remove cost sources at any time, provided they have not been connected to a cost source indicator or used elsewhere in the system.
The company must have been entered in the system.
Cost sources will become available to connect to cost source indicators. This will make it possible to follow up on costs based on the origin. Note: If the inventory valuation method is standard cost (and the cost level is per part), cost sources will not be taken into consideration or displayed on the cost detail lines.
If you selected the Mandatory to Use Cost Source option, you will not be allowed to define a cost structure without a cost source.
If you selected the Use OH Accounting Year option, every time a new cost detail line of type overhead is created, the accounting year will show the financial year in which the overhead cost was applied. This enables you to later on adjust overheads applied in your company during a specific year.
Labor overhead rate per cost source that will be used when labor is reported for a specific cost source, through Shop Floor Labor reporting, Project Labor reporting, or Work Order Labor reporting.
Note that cost sources have no direct connection to the financial term Cost Center. A connection between these two may be established by using posting controls.