Hi Shiv,
Basically you need to udnerstand the flow of the cost, by which you will understand the concept easily.
First the List of required Cost Elements are created by Finance team based on the business requirement.
In Plant maintenance, we have 4 types of cost
1. Internal Labour
The cost is calculated based on the Activity type / Cost Center, where the price is maintained in KP26. This Activity type holds a Cost Element, and this activity type is assigned in the operation.
So when you plan the cost in the operation, with activity type / cost center, which allocated the cost to the cost element (assigned in the activity type). You define a value category (Labour) and assign this Cost element.
When ever you post the cost for this Activity type irrespective of any cost center, the cost will be allocated under this cost element.
2. External Labour
Similarly, the cost element is provided in the Service Specification or defaulted in config (Default value for PM External Operation data), remaining flow is same, on how the cost element gets the cost and it is displayed in the cost tab
3. Internal Material
For Internal Material, there is a config called OBYC, where the valuation class is assigned with cost element. This valuation class is assigned to Material, so when ever this material is used in the order, cost is allocated to the Cost Element.
4. External Material
The cost element is entered in Purchasing Data or it flows from the config (Default value for PM External Operation data)
Finally, dont get confused with the term value category, it is just used to classify different cost for reporting.
Regards
Terence