SAP Knowledge Base Article - Public

3102562 - Target cost calculation for activity confirmation on production order


You want to know how the target cost being calculated for activity confirmation on production order.




Target costs of manufacturing orders are calculated according to different source of plan costs adjusted to the actual output quantity at the time of goods receipt as following:
Lot-size-dependent costs: Costs vary with the lot size are divided by the costing lot size (and plan output quantity), then multiplied by the actual quantity delivered (the yield).
Lot-size-independent costs: Costs do not vary with the lot size (such as setup costs) are used directly as target costs.


For example:
You create a material cost estimate, under 'Quantity Structure' view, here you can find the related routing information.
Double click the routing number, you will jump to the routing master data,
Routing has 2 operations, operation 0010 and 0020.
Each operation assigns a work center, operation 0010 -> work center A, operation 0020 -> work center B. 

Double click the work center A/B, you will jump to the work center master data.
Click the 'Costing' tab, you can find the related formula of each work center, 
Work Center A, Formula A = Labor.
Work Center B, Formula B = Labor * Operation quantity / Base quantity.

Which means Formula A is lot size independent, Formula B is lot size dependent.
So how the target cost being calculated?

For material cost estimate, costing lot size is M.
Activity/work center A consumes h1 hour, cost is C1.
Activity/work center B consumes h2 hour, cost is C2.

Production order has actual quantity and plan quantity. 
Total Target quantity  = h1 + h2/M*actual quantity.
Total Target cost = C1 +C2/M*actual quantity.

See Also

2618359 - FAQ: Product Costing: On-the-Fly Target Cost Calculation in S/4 HANA Cloud CE2105.


Target cost; Target quantity; Order confirmation; Activity Type; Work Center Formula; Routing. , KBA , CO-PC-OBJ , Cost Object Controlling , Problem


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