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production order and cost

Former Member
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Hi,

I need advice on target vs actual in production order.

give simple scenario.

say costing run on FG on 2012-06-01 which costed at $3 per piece and the BOM is raw1 = $1, raw2 = $2.

on 2012-09-01, same FG now costed at $3.50 per piece and the BOM is raw1 = $1.20, raw2 = $2.30.

output to produce 1000 pieces.

1) raw materials issued to production order is considered as actual cost or product produced received from production order as actual cost OR

 

2) raw materials issued to production order is considered as target cost or product produced received from production order as target cost.

thanks

Accepted Solutions (1)

Accepted Solutions (1)

Former Member
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Hi Srina,

Raw material issued to production is consider as actula cost.

Target cost = Your std cost multiplied with deliverd qty.

Eg; Rm issued toproduction order is $ 100

G/R from production order = 5 qty

Std cost estimation for 1 qty =  $10

Actula cost = 100

Target cost = 50 ( 5 * 10 )

Hope you under stood .

Regards,

Ram

Former Member
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Hi,

thanks for reply.

1)

At the time of actual goods issue as per the costing price strategy sequence defined in costing variant actual system will pick.

may i know you mean for goods issue to production order, the price of raw material is picked according to costing variant? are you referring to valuation variant in costing variant?

if in valuation variant, it is referring to price control, meaning regardless costing run, the raw material price will be the latest price in moving price?

so meaning goods issued (raw material) to production will be the latest raw material moving price. Correct?

2) goods receipt (finished goods) from production order will always @ standard price as per the last costing run. correct?

3) can i say actual cost = GI to production order and target cost = GR from production order.

thanks

Former Member
0 Kudos

HI Srina

1. The goods issues of consumption during production (i.e.actuals) are done at the qty as per confirmation, x with the price according to the valuation strategy in the material master. (I.e. either Standard or moving average, depending on the setting on the material master. (If you have material ledger active, you have a 3rd option, periodic unit price.)

It DOES NOT look to the valuation variant in the costing variant for rules as to how to value actual goods issued to production.

2.) As per the last Released costing run, to be exact.

3. No.

Actual cost is actual price of goods x actual qty of goods, whether it is the goods receipt or the goods issue. (In other words, the whole of the actual column is calculated that way.)

Target cost is the SCE price of goods x actual qty of goods, whether it is the goods receipt or the goods issue. (In other words, the whole of the target column is calculated this way.)

In other words, target gives you what you should have used, to produce the quantity you have actually produced.

You will notice that for goods receipt the target and the actual formulas will give you the same answer.

Former Member
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hi,

final clarification.

1) meaning actual cost is the latest moving price in MM03 if the price control of the raw material is V. Correct?

2) target cost is the SCE price of goods. may i know what is SCE price?

3) can i say actual cost and target cost are referring to BOM component (raw material which issued to production order) and not the final finish product which is GR from production order into inventory.

Thanks

Former Member
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hi,

any advice?

thanks

Former Member
0 Kudos

Dear srina,

When we see the cost analysis view of production order or process order we can see 3 costs

Plan cost: plan quantity(as per bom)*pricing strategy in plan costing variant(PPP1)

Actual cost: Actual quantity(Goods issue m type 261)*pricing strategy in actual costing variant (ppp2)

Target cost: target quantity*pricing strategy in plan costing variant(PPP1)

target quantity= delivered quantity/order quantity*plan quantity of BOM item.

One more scenario of you:

If you create production order for 1000 quantity and done GR for 900 quantity and standard price of the FG is 50$ suppose the total actual cost (goods issue+actual cost) is 50000$

Variance is Total actual cost- gr cost 50000-45000= 5000 (variance)

In case of GR for FG system will consider the standard price only for valuation for plan cost actual cost and target cost also.

Regards,

Ravi.

Former Member
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1.Yes

2. The values as per SCE.

3. If you look at the order reports - everything goods issue, overhead recovery, goods receipt is target if the column is target, is actual if the column is actual.

Former Member
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HI Ravi,

Unfortunately your definitions are not correct, please refer to my posting earlier in the chain for a full explanation.

Former Member
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Dear piet,

I explained the definitions with respect to costing variants.....

may i know how system will pick the price from material master( map or sp) with out valuation variant price sequence.

Ranjit posts are really very helpful........ Thank u dude.

Regards,

Ravi.

Former Member
0 Kudos

It depends on whether the system is looking for the price for actual goods movements, of for the price for Cost Estimate calculations.

If the price is for cost estimate calculation purposes, then it will follow the rules in the costing variant.

If the price is for goods movements, i.e. FI relevant, it will use the price on the material master according to the pricing indicator.

Former Member
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Dear piet,

May i know what is the use of configuration in OPL1 transaction and also please see the attached screen shot of display order in control tab.

I thought as per the plan and actual variants system will calculates the plan and actual costs in order level also.

Regards,

Ravi

Answers (2)

Answers (2)

former_member183818
Contributor
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Hi,

Piet has given a clear understanding on the queries. Kindly go through the below documents alos for better clarity.

Post Implementation Challanges Part 1

Post Implementation Challanges Part 2

Production Order Variance Part 1

Production Order Variance Part 2

Regards

Ranjit Simon

Former Member
0 Kudos

At the time of actual goods issue as per the costing price strategy sequence defined in costing variant actual system will pick. Actual Goods receipt always consider standard price in material master. In your example GR cost for 1000 Quantity for month of September production order is 1000*3.50=3500$