Skip to Content

Target Cost and Actual allocated cost : Variance calculation


We have Material Ledger active with actual costing run every period.

During the variance calculation, target cost is appearing as zero (0) for all the production orders. All settings are in place. We release the standard cost for the sales order before the production order is created. Also, TECO process is done regularly before starting the CO closing. Still the target cost is ZERO for all orders. No idea where are we going wrong.

After the variance calculation, I find actual cost and Actual allocated cost. The difference is coming as variance.

If I post this variance, will it be proper variance in my book at the time of order settlement ? Or should I have Target cost for proper variance ?

Please help me in this difficult situation.


Add comment
10|10000 characters needed characters exceeded

  • Get RSS Feed

7 Answers

  • Best Answer
    Oct 01, 2017 at 09:39 AM

    well there are three types of variances

    Total Variance

    Production Variance

    Planning Variance

    out of these variances, only total variance is settles to FI. Total variance is based upon input variance and output variance.

    Input variance = actual cost - target cost

    out put variance= target cost - allocated actual cost

    the formula to calculate the variance is

    Variance = Actual Costs − Actual Costs Allocated (credits) − WIP − Scrap

    Add comment
    10|10000 characters needed characters exceeded

  • Aug 27, 2017 at 06:41 AM

    Any inputs please ?

    Add comment
    10|10000 characters needed characters exceeded

  • Aug 30, 2017 at 08:22 PM

    Hi Nikki,

    Is it happening to all the order or individual order? If all the order then please check if the variance key is assigned to the Target cost version, and if not then the Target cost version would be inactive. (If the configuration is good)

    Then the way system works is during variance calculation, the system user the cost estimate that is valid on the date when the order has status TECO or DLV, if such cost estimate is not there, check if you have cost estimate correct on the valid dates of order when it was TECO/DLV?


    Add comment
    10|10000 characters needed characters exceeded

  • Sep 19, 2017 at 06:38 AM

    Hello Nishan

    We use the target cost verions '0' and variance variant 001 is already assigned to it.

    Still all production orders, no target cost is calculated.

    On checking, we found that there is valid cost estimate at the time of variance calculation. In fact, we release the SO cost estimate before starting the production.

    Also, no comment is given for my query : whether the variance calculated by the system based on the actual allocated cost instead of target cost would be correct ?

    Add comment
    10|10000 characters needed characters exceeded

  • Sep 21, 2017 at 10:12 AM

    Hi Nikki,

    This may occur because one of the following criteria are true:

    • 1 - There is no Valid Standard Cost Estimate. (Check in table KEKO, the valid to and from dates)
    • 2 - Variance calculation has not been done yet. The order should have status VCAL (see order header or RKACSHOW (table JEST)
    • 3 - No Goods Receipts - see costs analysis report. The order is not set to DLV/TECO
    • 4 - In the variance calculation target costs are calculated only for that part or those cost elements of the relevant cost estimate which are relevant for the stock valuation. (see CK13N, Inventory valuation view). Order Status “VCAL”
    • 5 - The target credit is not calculated on-the-fly by the target cost calculation in KKBC_ORD or COR2/3 but only by the variance calculation and therefore they appear with value zero as long as the variance calculation has not been run in update mode.
    • As an alternative you could apply the note 834317. But please notice that this note contains a modification and not a standard correction.


    • Please note that the target costs are calculated and written to the database only at the point of variance calculation.
    • Before that point, you can still see the 'online' calculation of the target costs for example in CO03 cost analysis report in report 'Target/Actual comparison', only if good receipt have taken place. This is only for information purposes since no variance calculation has taken place yet.
    • Target costs are calculated by multiplying the receipt quantity by the planned prices from the current cost estimate (in version 0). Please note that the system looks for the released cost estimate of the head material for calculating the target costs of each item. That means that the costing status of the head material must be 'FR', not the one of the component.
    • In addition to this, please check entries for target cost in table COSP to make sure that the released cost estimate was the current one for the period were the target costs were calculated.
    • The note 414378 mentions that you need to set status DLV/TECO and carry out the variance calculation in order to be able to see the target cost in your cost analysis report.

    CO-Product Scenario

    • The order has co-products which creates a different scenario with target costs. Specific to co-products however is, actual costs remain on the header until CO8B is executed and distributed to the individual items.
    • You can only display target costs for joint production on the level of the order items. For this you can use report KKBC_ORD, "Settings" -> "Order Items" -> "on/off". You can now enter in the item number and view the target costs. This has to be done on an individual basis as there is no collective method to view this data for co-products.
    Add comment
    10|10000 characters needed characters exceeded

  • Sep 21, 2017 at 04:43 PM

    Please check variance variants in SPRO that all checks like input price variance, mixed prices variance are properly marked.

    please also check your target cost version that current standard cost estimate is selected.actual cost is selected for control cost

    Pleas also check that variance key is assigned to plant.

    Please make sure that order must be TECO

    which t code you are using for variance calculation?

    Add comment
    10|10000 characters needed characters exceeded

  • Oct 01, 2017 at 06:18 AM

    Thanks for the input.

    But still I did not get answer to my question :

    "whether the variance calculated by the system based on the actual allocated cost instead of target cost would be correct ?"


    Add comment
    10|10000 characters needed characters exceeded