Cost Categories

After technical completion of PP orders, all of them should be processed in CO-PC module. Before order settlement can be done, variance calculation should be performed.

After variance calculation, Target costs are given. Target costs version 0 is normally used (the difference between standard price of produced materials and actual costs).

Actual costs for consumed semi finished materials are given based on valid Cost estimate at posting date.

Actual costs for consumed raw materials are given based on actual price at posting date.

Example: planned quantity is 10.000 PCs, and produced quantity is 9.600 PCs.

• Planned Costs will be calculated based on planned quantity (normative quantities needed for 10.000 PCs to be produced).
• Actual Costs are cumulated costs of all postings with reference to particular PP order (everything consumed in order to produce 9.600 PCs).
• Target Costs will be calculated based on produced quantity (normative quantities needed for 9.600 PCs to be produced). The base for Target costs is approved Cost estimate for material produced.

Production Variance is the difference between actual and target cost, or difference between posted input costs and target costs, or difference between posted input costs and posted output costs related to PP order. Total variance is posted on FI accounts with PP order settlement step.

Target cost of a PP order are the normative costs for the actual produced quantity. They are calculated according to costing variant ZPC1.

Several versions of target costs can be created and used (0,1, 2).

Target Costs, version 0 (Total Variance)

• Control costs: actual costs (actual debits)
• Target costs: current standard cost estimate (actual credits)

The Variance calculated in target version 0 will be posted in FI during the settlement process. Variance categories calculated in this target version can be posted to CO-PA.

Target Costs, version 1 (Production Variance)

• Control costs: actual costs (actual debits)
• Target costs: planned costs of PP order

Production Variance is the difference between net Actual costs debited to the order and target costs based on the preliminary cost estimate of PP order.

The Variances calculated in this target version are for information purposes only and cannot be settled.

Target Costs, version 2 (Planning Variance)

• Control costs: planned costs of PP order
• Target costs: current standard cost estimate (actual credits)

Planning Variance helps to decide which Master Recipe (and BOM) to manufacture with. This is the difference between the PP order preliminary cost estimate and target costs based on standard cost estimate and planned order quantity.

The Variances calculated in this target version are for information purposes only and cannot be settled.