Target Cost = How it is calculated for activity types ?

[former_member218048]

Hi

Can you please guide me how the target cost for an activity is calculated on the production order ?

I know that target cost =

planned costs / planned output quantity or lot size * actual output quantity

I tried this formula but could not understand how a target figure (example) is calculated on the Production order.

if you can tell how for example how the Target Cost 32 USD is calculated in the following image:

The activity price fot 653001 in cost centre 2010299 for 2019 = 11.97 $.

Thanks.

[former_member218048]

I understand your point. But we created the production order in May/2019 and the the activity price should be from the May/2019 only. We release the plan prices in the year start and did not change anything after that. Thanks.

[former_member218048]

I did not understand your point that the KSBT prices are not related to the cost estimate.

The activity prices in the cost estimate is nothing but what flows from the Cost Centre/Activity Plan rates in the CO.

In the production order Cost analysis, the plan cost is exactly same as our KSBT prices. But the system has taken some other value for plan price in the Target Cost calculation. I guess it it should be the same plan cost appearing on the order. Correct me if I am wrong.

[former_member513101]

Hi Nikki,

Let me ask you these questions, Standard cost in May is 100 (activity cost is 10/h) and June is 105 (activity cost is 11/h).

1. You create production order in may, the planned cost in CO03 is 100 right?
2. If you change the activity price in KP26 for May to 12/h, the planned cost in CO03 still the same?
3. If you GR the FG in June for quantity 1, the inventory cost is 100 or 105 or 106?
4. Let say the actual cost to this production order is 110, so the variance is 10 or 5 or 4?
5. Plan cost and quantity involve in target cost calculation, system should use 10/h or 11/h or 12/h? why?

Thanks

[former_member218048]

As advised, I have analyzed the target cost on the production order.

But I think the plan cost calculated for the activity type on the order is wrong. Not able to understand how the system has arrived the plan cost of 118.64 ?

Please see the image in which :

Total Plan cost for the activity = 118.64.

Plan Quantity = 90.694

i.e. Plan cost / unit quantity = 118.64 / 90.694 = 1.30 only.

This is wrong. As per our plan activity price calculation the Plan cost per unit for the activity type in the cost centre for the period is = 44.88 (KSBT report) per H.

Then how the plan cost on the production order is wrong ?

[former_member513101]

Hi Nikki,

The plan cost and plan quantity calculation in KKS2 not based on price in KSBT or KP26. It is based on the valid standard cost when you GR the FG material. You can verify it via S_P99_41000111 - Analyze/Compare Material Cost Estimates. You can check the setting via OKV6. Here you set the target cost version 0.

Target cost version 0 is used to explain the difference between the debit and credit of the product cost collector or manufacturing order. The target costs calculated on the basis of the current standard cost estimate are compared with the actual costs from which the work in process has been deducted. The difference is assigned to different variance categories depending on the cause.

Common sense. when you GR the FG in May 2019 with activity price 10 per hour and the standard cost is 100. However, we release standard cost in June with activity price 11 per hour and the standard cost is 105. Or you change the May activity price to 12. System cannot based on activity price 11 or 12 to calculate the variance. Bear in may, when you GR the FG in May, it based on May standard cost to inventorize the cost.

Thanks.

[former_member513101]

Hi Nikki,

You can check it via KKS2 > click on cost element > select the cost element line item > click on the target cost button.

kks2.png

kks2-tc-analysis.png

Thanks

[former_member218048]

Thank you Lam for your guidance.