Calculation of Net Actual Costs in Variance Calculation 

Description

In Release 4.5 in the following variance types, the scrap variances can be deducted from the actual costs to calculate the control costs:

• Production variance

Theproduction variance is calculated by comparing the target costs calculated on the basis of the preliminary cost estimate for the manufacturing order or product cost collector to the (net) actual costs.

In the standard system, the calculation of the production variance is defined with target cost version 1.

• Production variance against planned price of period

The production variance against the planned price of the period is calculated by comparing the target costs calculated on the basis of an alternative material cost estimate (such as a modified standard cost estimate or current cost estimate) with the (net) actual costs.

In the standard system, the calculation of the production variance against the planned price of the period is predefined in target cost version 3.

• Total variance

With thetotal variance the scrap variances are deducted from the actual costs as previously.

In the standard system the calculation of the total variance is predefined in target cost version 0.

The costs that are compared with the target costs in variance calculation are called control costs.

In Product Cost by Order the control costs are normally calculated as follows:

Actual costs

./. scrap variance

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= Control costs (= net actual costs)

In Product Cost by Period the control costs are calculated as follows:

Actual costs

./.work in process at target costs

./. scrap variances

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= Control costs (= net actual costs)

You can decide yourself if you want to deduct the scrap variances from the actual costs. If you decide not to deduct the scrap variances from the actual costs, the costs for the scrap go into the different variance categories on the input side.

Make the settings below in Customizing to subtract the scrap variances from the actual costs.

Change system parameters in customizing

1. Go into Customizing in the variance variant.

2. In the variance variant, select the indicator Scrap variance.

3. Assign the variance variant to the target cost version in which you want to deduct the scrap variances from the actual costs.

See also:

Variance calculation in Product Cost by Period

Variance calculation in Product Cost by Order

Further notes

For information on variance calculation, refer to the document Cost Object Controlling.