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overhead calculation in production order activity


during month end, for production order or process order, i need to carry out the activity in this order - overhead calculation -> wip -> variance -> settlement.

1) may i know why overhead must be the first step?

2) for plan OH, it is to affect the costing run to get the fnished goods price. may i know for actual OH kgi2/co43, what is the implication after run this actual OH?


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1 Answer

  • Best Answer
    Dec 09, 2012 at 02:23 AM

    Hi Banniya,

    At the time of order creation you will get plan price based on plan qty and standard price. After issuing goods to order raw material price will be taken on that day prices aaccording to price control in material master. If you observe the actual column for activity cost before month end activities it will be based on plan price. After you run KSII -actual activity price calculation it will update with actual qty * actual price.

    Here the importance of actual OH calculation is it will be based on material and activity costs. E.g. if your OH cost is 2% on conversion cost (activity cost). Before month end activity total activity cost is INR1000. Here OH cost will be INR 20. At the time of month end: after KSII, your total activity cost is INR1200. In this case to update the OH% we run KGl2. So that it will update 2% on 1200.

    After that you can carry out with WIP, Variance and settlement.


    Srinivas salpala

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