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Former Member

Activity cost impact on Target Cost issue

Dear All

I have one issue of Setup cost.

The setup cost (Activity cost in Work Center)in my company is of onetime only as when we change the Dies and some parts it take fixed time and accordingly the fixed cost.

As we have to Do KP26 planning for all activities we mention 1rs per Hr and that is per unit.

But when we do the production of 1000 quantity of Finish Product system calculate the Target cost of Setup by Multiplying the total production .i.e 1 * 1000 = 1000 Rs as target cost.

Ideally system should calculate only 1 rs as target cost as it is fixed

In work center it is also maintain 1hr as setup cost

If we check the same in CK13N system keep on increasing the cost of setup when we increase the lot size by user entry in Costs Based On option.

Because of this system is calculating huge amount of variances in the system.

Regards,

Shayam

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3 Answers

  • author's profile photo Former Member
    Former Member
    Posted on Jul 13, 2011 at 09:28 AM

    Check your routing for this purpose.. i.e. how many hours are required for producing 1000 units of FG.

    since you have maintained 1 per hour, for producing 1000 units system might require 1000 hrs of activity type..

    Regards,

    Sayujya

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  • Posted on Jul 13, 2011 at 05:20 PM

    Dear,

    Please check the formula for calculation of Cost which you or PP consultant would have defined, there you must have given the cost to be multiplied by quantity.

    Please check and revert.

    br, Vivek

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  • author's profile photo Former Member
    Former Member
    Posted on Jul 13, 2011 at 07:47 PM

    Hi,

    As View_taurian says, check the formula for calculation of Cost. To do that, execute the transaction CA03 (Display Routing) and enter the material and plant you want to analyze. Then, select the line that you want to analyze and click on Work Center. Then go to Costing view, select the activity type and click on Display formula. Also you can do a formula testing with the respective button (Test Formula).

    Regards,

    David Z.

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