Show TOC### Variance Calculation: Process Flow

#### Prerequisites

#### Process Flow

See: Variance Calculation

You start variance calculation.

The system calculates the scrap for the order on the basis of the confirmed scrap quantities by operation and the scrap quantities that were confirmed in the subsequent operations. The system valuates the unplanned scrap quantity at target costs.

To determine the total variances in the

*Product Cost by Period*component, the system calculates the control costs by subtracting the value of the work in process and scrap from the actual costs of the period on the basis of confirmations.To determine the total variances in the

*Product Cost by Order*component, the system calculates the control costs by subtracting the value of the scrap from the cumulative actual costs.The system calculates the target costs for the period on the basis of the quantity delivered to inventory in the period and the planned costs according to the cost estimate used to calculate the target costs.

The variance calculation process compares the control costs with the target costs and assigns the differences to variance categories by cost element. If the system cannot calculate the target costs, for example because no delivery has taken place in the period, it only reports remaining variances.

To analyze the variances, you use the explanation facility of variance calculation.

To analyze the scrap, you use the explanation facility of scrap calculation.

When you settle, you can pass the data to

*Financial Accounting*(FI),*Profit Center Accounting*(EC-PCA), and*Profitability Analysis*(CO-PA). If the*Actual Costing/Material Ledger*component (CO-PC-ACT) is active, you also settle to that component.