Hi David,
When do we get Material variances?
If there is any change in the raw material price at the time of standard cost release with actual production time.
Is it when we close the open production orders?
Variance calculation is based on the order status. If the order status is either Deliver (DLV) or Technically Completed (TECO) you can calculate variance.
If you use Product Cost Collector (PCC), you can calculated WIP and Variance simultaneously.
What are the steps when variances gets calculated?
If you ask about only calculated variance then it is through KKS1 (cumulatively at plant level) and KKS2 (Individual order).
Go through below are some of variance categories:
Input price variance:
Variance occurred due to price difference between raw material price at the time of standard cost estimate and price prevailing at the time of raw material actual issue.
Input quantity variance:
Variance occurred due to quantity difference between activity / raw material quantity at the time of standard cost estimate and quantity actually confirmed or withdrawn.
Resource usage variance:
Variances occurred due to usage of different material other than the one mentioned at the time of standard cost estimate.
Remaining input variance:
Additional material overheads absorbed due to input price increases are classified under this head.
Mixed price variance:
If the standard cost estimate is created using various procurement alternatives (mixed cost estimate), variances are bound to occur in the PCC. These variances are classified under this head.
Lot size variances:
Variances occurred due to lot size differences between standard cost estimate and production. This results in different rate of fixed cost absorption. These kinds of variances are classified under this head.
Lot size variances are only calculated if the planned quantity differs from the delivered quantity.
Output price variance:
Finished goods receipt from production is at price different from standard price. The difference is classified as out put price variance.
Remaining variance:
If target costs are not available system can only determine remaining variances.
Nothing but minor differences
BR, Srinivas Salpala
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