Features

The costs of a cost object hierarchy are determined using a material cost estimate or a preliminary cost estimate for the order, and reflect the quantity delivered for the orders in the period. The target costs are summed by hierarchy node to create a basis for variance calculation and distribution.

When the system calculates the target costs, it can update the costs both as a total and broken down into fixed and variable costs.

A requirement for this function is that the price control indicator in the material’s master record is set to S (standard price) and that the target costs are calculated on the basis of a valid standard cost estimate.

Target Cost Calculation with Target Cost Version 0:

With target cost version 0 in make-to-stock production, the target costs for the materials assigned to the hierarchy can only be calculated under the following conditions:

The costing view of the material master record shows which standard cost estimate is active for the period. You can use the following entries to identify the cost estimate on which the current standard price is based:

In sales-order-related production with a valuated sales order stock, the cost estimate used as a basis to calculate the total variance is selected in accordance with a strategy sequence.

Target Cost Calculation with Target Cost Version 1:

Target cost version 1 can be used as the basis for actual cost distribution and for calculating production variances for informational purposes.

The target costs calculated with target cost version 1 are based on the preliminary cost estimate for the production order, process order, or product cost collector, and on the quantity delivered to stock during the period.

You can use target cost version 1 to calculate the target costs only under the following conditions:

If the reporting point structure in a run schedule header is changed, note that you can convert the reporting point backflushes.

Target Cost Calculation with Target Cost Version 3:

The target costs calculated with target cost version 3 are based on an alternative material cost estimate (such as a modified standard cost estimate) and on the quantity delivered to stock in the period.

You can use target cost version 3 to calculate the target costs only under the following conditions:

Constraints

If the system cannot determine the cost element for a target cost, this may be because:

In this case equivalence numbers are created on the basis of the cost element group specified in the target cost version. The system uses the cost elements of the cost element group that directly contains the cost element to be distributed.

If costs are incurred in a period for a cost object node in which no goods receipt took place (because the orders had only scrap, for example), these costs cannot be distributed to the orders. These costs are reported as remaining variances. Currently, it is necessary to manually create a settlement rule for this cost object node that assigns the actual costs to a price difference account.

See also:

For more information on target cost versions, refer to the following section:

Target Cost Versions in Variance Calculation

For information on target cost calculation, refer to the following section:

Calculation of Target Costs

For more information on modified standard cost estimates, see the document Product Cost Planning .

For information on valuated sales order stocks, refer to the following sections:

Valuated Sales Order Stock: Valuation

Standard Price with Valuated Sales Order Stock

For information on converting reporting point backflushes, refer to the following section:

Flexible Reporting Points

Updating the Preliminary Cost Estimate