Product Variance Calculation
Gurus,
How do we calculate Product variance?
What is the procedure / process?
Where can the effect be seen?
Edited by: Bhatia on Oct 15, 2008 6:44 PM
Hi,
Variance Calculation
As long the production order is not fully delivered or flagged Technical Complete the remaining order balance is treated as WIP. Otherwise the order balance shows up in variance calculation.
If a lot-based product-controlling WIP, is valuated at actual costs. The WIP is calculated as the difference between the debit and credit of an order as long as the order does not have the status DLV (delivered).
In lot-based product controlling the variances are not calculated until the order has the status DLV (finally delivered) or TECO (technically completed). This means that at the time the order has reached this status, the system no longer interprets the difference between the debit and the credit as work in process but as a variance. In lot-based product controlling orders never have work in process and variances at the same time.
Variance calculation compares the actual costs incurred for the production/process order with the target costs according to the standard cost estimate for the finished material, and assigns the individual variances to variance categories. The target costs are calculated using the quantity delivered for the order.
In this way you can find out which variances occurred between the value of the delivery and the actual costs and you can find the reason for the posting to the price difference account for materials with standard price control.
Variances from production (target version 1)
Variance calculation compares the actual costs incurred for the production order with the target costs for the production order and assigns the individual variances to variance categories. The target costs are calculated using the quantity delivered for the order.
This enables variance calculation to find out which variances occurred between the time the production order was created and the end of the production process.
Variances from planning (target version 2):
Variance calculation compares the planned costs for the production order with the target costs according to the standard cost estimate for the finished material, and assigns the individual variances to variance categories. The target costs are calculated using the quantity delivered for the order.
This enables variance calculation to find out which variance occurred between the time the standard cost estimate was created and the time the production order was created.
Variance categories:
The system assigns every variance to a variance category. The variance category indicates the cause of the variance (such as price change, lot-size variance). Variances are updated to the information system and passed on to Profitability Analysis according to variance category.
You differentiate between variance categories on the input side and on the output side:
u2022 Variances that occur because of goods issues, internal activity allocations, overhead and G/L account postings are displayed on the input side. Price variances, quantity variances, resource-usage variances and input variances are displayed on the input side.
u2022 Variances that occur because too little or too much of the planned order quantity were delivered, or because the delivered quantity was valuated differently are displayed on the output side.
Variances on the output side occur when you deliver using a price that differs from that found by dividing the target costs and the delivered quantity. If you deliver using the standard price, a variance can occur when the order lot size differs from the costing lot size. This is displayed as a lot-size variance.
For config
3.1.4.2 Variances & Settlement
Variance Calculation determines differences between the actual costs incurred on a production order and the standard costs of the material produced. Variances are calculated not at once, but for different variance categories. The variances computed are then transferred to CO-PA.
3.1.4.2.1 Define Default Variance Keys for Plants
Use
The Variance Key is part of the order header and controls variance calculation. The system selects the value set by this step as default value when a material master is created. From the material master the variance key then is transferred to the order when an order for the material is created.
Procedure
1. Access the activity using one of the following navigation options:
Transaction Code OKVW
IMG Menu Controlling Product Cost Controlling Cost Object Controlling Product Cost by Order Period End Closing Variance Calculation -> Define Default Variance Keys for Plants
2. Make the following entries:
Plant Variance Key
BP01 000001
BP02 000001
BP03 000001
BP0X 000001
3.1.4.2.2 Define Target Cost Versions
Use
The target cost version controls various parameters related to calculation of target costs in variance calculation. In variance calculation, target costs are needed as a comparison to the actual costs incurred.
Procedure
1. Access the activity using one of the following navigation options:
Transaction Code OKV6
IMG Menu Controlling Product Cost Controlling Cost Object Controlling Product Cost by Order Period End Closing Variance Calculation Define Target Cost Versions
2. Choose New entries and enter the following values or copy from default settings of CoArea 0001 to BP01:
CoArea TgtCostVsn Text Variance Variant Control Cost Target Cost
BP01 0 Target Costs for Total Variances 001 Actual Costs Current Std cost Est
BP01 1 Target costs for production variances 001 Actual Costs Plan Costs / Preliminary Cost Estimate
BP01 2 Target costs for planning variances 001 Plan Costs Current Std cost Est
3.1.4.2.3 Create Settlement Profile
Use
The settlement profile controls various parameters related to settlement.
Prerequisites
Allocation Structure
Procedure
1. Access the activity using one of the following navigation options:
Transaction Code SPRO
IMG Menu Controlling Product Cost Controlling Cost Object Controlling Product Cost by Order Period-End Closing Settlement Create Settlement Profile
2. Choose New Entries and enter header data. Then for each new entry choose Details and enter remaining data.
3. Overview of data records:
Profile Text
YGPI00 BP Process Order w/o CO-PA
YGPP00 BP Production Order w/o CO-PA
YGPI00 YGPP00
Actual costs/costs of sales
To be settled in full X X
Can be settled
Not for settlement
Default Values
Allocation Structure A1 A1
Source Structure
PA Transfer Struct.
Default object Type
Indicators
100% Validation X X
%-Settlement X X
Equivalence Nou2019s X X
Amount Settlement
Var. to co. bsd. PA
Valid receivers
G/L account N N
Cost center O O
Order O O
WBS Element O O
Fixed asset N N
Material O O
Network N N
Profit. Segment N N
Sales order O O
Cost objects O O
Order item O O
Business proc. N N
Real est. object N N
Other parameters
Document type SA SA
Max.no.dist.rls 3 3
Residence time 3 3
You have to assign Variance Key in material master for semi-finished and Finished goods in costing 1 tab also.
To Execute
KKS1-Collective Variance calculation
KKS2-Individual Variance calculation
CO88-Collective settlement
KO88-Individual settlement
Thanks,
Rau
Similar Messages
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Production variances calculation when using assessment to PP orders
Hi,
I managed to activate assessment to Production orders in BS12.
I activated business transactiun RKIU for PP orders object.
Now it's possible to allocate OH costs from Cost centers to production orders.
However, I have some problem of other nature.
When I do the standard price calculation - the Overhead costs from Production Departament CC are calculated as % overhead using costing sheet. It is done by cost element with cost element ctg 41.
The actual OH costs from Cost centers are allocated using assessment. Other cost elements with cost element category 42 are being used here.
How will the system calculate production variances in this case?
Do u think it is possible to match these two different cost elements?
Will this CE with 41 ctg be considered during variances calculation and if yes - which variance category will it be.
I am uncertain about that, cause in normal cases - activitity CE or materials consumption CE are the same in actual and target. In my case overhead CE are different in actual and in target.
Can u help me with that?
Best wishes,
KarolIt's looks like you are right. I've made production version for configured material and production order created. Thanks.
Due to such a behavior we have to make two different integration models - the first for KMATs and its PDSs and the second for configured variants. And we have to make production versions for all variants.
Am I right? -
Avoid variance calculation on product order
Hi experts,
i have a question. We have a material with cost estimate with quantity structure, cost estimate is release. All cost components in cost component structure are in inventory valuation. On the product order are then target costs. When material is producing, one component of BOM (cost element XXX) is not consumption on product order. When i start variance calculation, SAP calculate variance to this one component (cost element XXX) and by settlemnet of order, posting variance to FI. But this thing i don´t want. It is possible prohibit calculation of variance for this component of BOM - cost element XXX on product order? It is possible prohibit settlement this variance to FI? What i can do for it?
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GustavoHi,
i must settlement product order, so i need variance calculation. So can i settlement variances to FI only for some components of BOM and one variances of one component leave on procuct order? Or can i settlement variances of one component of BOM to other cost centrum than others components (alternatively under other cost elements)? Maybe substition.... If yes, how?
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Gustavo -
Product costing - Variance calculation, Information system,
Hi,
I have an issue reconciling variances in product costing when I run S_ALR_87013139 - Cumulative. For instance I am getting results like below
Tgt (Dts) Actual (Dbts) Scrap Variance WIP Control Costs
33946 183020 0 27248 -95034 0
I was expecting
Variance = (Actual Debits - WIP credited) - Target Debits.
But it is not so. Am I missing something here
Would also appreciate if someone could tell
1. What does the target cost mean/how is it different from planned costs.
2. When is the target cost calculated? Is it only after the order is complete and variance calculation in KKS2. I also fing that whenever a production order is created I dont get target costs. Only planned costs are there.
Thanks for your help.
RamHi Ram
Following are explanations for clarifications u asked for
1) Target costs = Actual qty delivered X standard costs ( as per standard cost estimate for the material). This means standard costs for actual goods delivered to stock. Planned costs means standard cost for planned qty of production order
2) Variances are calculated if the status of the order is either DLV or Teco and if material is issued and activities are confirmed. WIP is cancelled and variances are calculated
3) When u create production order - system only calculated planned costs of the order for planned quantities. Target costs are calculated only when goods are delivered to stock for the order either partially or full. Even if one qty is delivered to stock target costs gets calculated
Hope the above clarifies and do your checks with above
Pls assign points for the above clarifications provided -
Variance calculation for production order with settlement receiver as SDI
Hi...
I have one query reference to Variance calculation for production order with settlement receiver as SDI(Sales document item).
I am working on Varaint configuration with strategy 25(Make-to-order for configurable material) with requirement class 046.
I have created sales order ref. to configurable material,subsequently created planned order & then converted to production order.
In production order settlement receiver is SDI(Sales document item).
While doing production confirmation ,variance has been created.
Now during variance calculation KKS2, I have got error message as no suitable settlement rule found for object Order no.
Is there any way to come out of this?Or variance calculation KKS2 is not applicable with settlement receiver as SDI(Sales document item).
Pl. guide
Redards
TusharHi
In case of non valuated material, concept of variance does not apply...
Variance is Actual Cost - Cost of Goods receipt posted in stock.. If the later value is zero, your entire actual cost is variance... That is one way of saying it
But, in SAP, var not calculated in case of non valuated material and that makes sense as well.. Since you are in MTO scenario, it would make sense to analyse costs vs revenues @ sale order level as each SO will be unique in itself
Regards
Ajay M -
Variance calculation for production order
Hello,
I am clarifying what's the selection criteria for settled production orders so that we can carry out the following
close and deletion flag activities.
I am currently in release ECC605. Need to carify the below questions.
1. For production order without header material (dismantle production order), no need to do variance calculation before
settlement,right? Because I found system will respond green light but "no order was processed", this kind of production order
won't possess "VCAL variance calcaulted" system status.
2. For all production orders created with header material, vairance calculation is a must, even the variance is 0.
So the production orders will possess "VCAL" status after variance calculation transaction is done.
Thanks for your help in advance.
B. Regards,
NancyHow does input variance and output varia.nce will be calculated on the settlement of production order after TECO.
VARIANCE CALCULATION DEPENDS ON CONFIGURATION IN THE FOLLOWING AREAS,
1) VARIANCE VARIANT - DETERMINES WHAT VAREIANCE CATEGORIES ARE CALCULATED, E.G MATERIAL PRICE , USAGE, LABOUR RATE , USAGE VARIANCE ETC..
2) TARGET COST VERSIONS
3) VALUATION VARIANT FOR WIP AND SCRAP
Can we check in KOB3 or COOIS.
KOB3 - YES
COOIS - CHECK IN COST REPORT -
Accounting entry - WIP, Variance Calculation & Settlement of Production Orders
Hi All,
Please explain the process of WIP calculation, variance and settlement of production orders. At each stage will there be an accounting entry generated?
1. WIP calculation: All production orders for which the status is REL at the month end will be included in WIP calculation. How the amount of WIP is derived and what will be the accounting entry.
2. Variance calculation: Production order needs to have the status TECHO in order to do the variance settlement. Will there be an accounting action and how the amount will be calculated?
3. Settlement of Production Orders: Dr. WIP A/c (Balance Sheet a/c)
Cr. Volume Variance WIP a/c (P&L Account)
Is this the correct accounting entry? If yes, please advice how the WIP a/c is showing balance on settlement of production order, how it will get nullified? If no, please advise on the correct process?
RegardsDear Andy
In product cost by order scenario the WIP or Variance calculation is dependent on order status. If the Order has a status of REL or PDLV, the system will calculate WIP and if the order status is DLV or TECO the system will calculate variance on this order. At the time of calculation of WIP or Variance no accounting entry i generated but when you settle the order at that time FI documents are passed in the books.
Ans1- In product cost by order WIP or variance is calculated based on the actual cost debited to the order and value of GR made to the order. System does calculation by the formula GR value-(GI value+Activity value+ Overheads)
Ans2- As I said at the time of calculation no FI entries are passed but at the time of settlement FI entries are generated. The method of calculation is the same as described in Ans1.
Ans3- Entry at WIP settlement WIP (P&L) a/c Dr and WIP Offsetting(B/S a/c) Cr.
Entry at variance settlement : Variance a/c dr/cr and COGM cr/dr.
and if there is already a WIP posted for this order then at settlement WIP entry is reversed provided we have calculated WIP again the the month of settlement of variance
Note for Anand: Dear Anand we need to calculate WIP again in the period when the order status is changed to DLV or TECO otherwise system will not pass reversal entry of WIP. Kindly test it in your IDES and let me know if you find something on the contrary.
Regards
Rajneesh Saxena -
Production order variance calculation RKKKS000
Hi Gurus,
we have a strange issue, where system is taking more than 28 hours to calculate variances by using program RKKKS000. because of this business en-countering issues for month end processes, I came to know one of the program which has the ability to select order type and number range KKS1 RKKKS1N0.
can this job be used in 4.7 version if so how to find the order types and muber range for selection. if business wants to use Existing program RKKKS000 is there any way to reduce Job performance (less than 10 hours).
Thanks,
SreeHi,
set status DLFL for the orders that should not be processed anymore, thats the best way to reduce the variance calculation runtime.
Check SAPNET note 393896 for other performance tips (parallel processing,...)
BR Christian -
Production Variances of semifinished goods in COPA
Hi,
We are using Costing based COPA, which is updated at the time of billing.
The production variances are posted to COPA when the settlement of the production orders are done.
The production variances if brought within the purview of COPA report (based on sales), the plan vs actuals can be compared. However, in case of actuals, the production variances would appear only to the extent of tha particular product sold (that too, to the extent of qty produced and not qty sold)..
I have two issues:
1. Whether system can explode the BOM and bring in the production variances of semi-finished goods into the total production variances, if I drill down only on the Finished product sold. The total actual cost would include the variances of relevant SFG also. Is this possible, if so how?
2. Whether, by bringing production qty and sales qty, the proportionate prod variances be calculated (total prod var * sales qty / prod qty). This can surely be done by inserting formulae. But is this justified from business point of view?
Please help me resolving this issue..
Edited by: Swapvik on Mar 17, 2009 7:11 AMHi Swapvik,
Issue No.1:
When you are using only Standard Costing in CO-PC, variances will not get rolled-up to the next level. Only costs get rolled-up. As per your requirement, when you see the report in COPA, when you see the details of FG and you want to see the variances of it's SFG also, this would be possible only if you have activated Material Ledger. If ML is active, variances also get rolled-up along with costs.
Issue No.2:
The ultimate purpose of bringing Variances into COPA and making part of them in a report is to consider COGM subject to the variances. Though it is not 100% justified, it gives you the most appropriate analysis compared to where you don't consier the variances at all. If you don't consider variances there, that means, you are considering only COGM and not taking the effect of variances, which will definitely not a correct picture of Profitability.
Pls revert back for further explanation...
Srikanth Munnaluri -
Actual cost is not seen in the variance calculation KKS2
Hi
I did variance calculation of a Production order ( after telco) . Its a co - product. The target cost , actual cost and allocated cost fields are present after execution. Now the actual cost field is blank and so the variance is not correct.
Pl advise on why the actual cost field is not populated with the cost.
Thanks
kamalaHi
KOB1 shows the actual cost . I do TECO for the PO and calculate Variance for co-product material, and the actual cost is showing at zero. But then i do settlement KO88, and the variance amount gets posted CORRECTLY and FI document is generated.
So why is the ACTUAL COST field ' ZERO' in KKS2, but KO88 settlement shows the variance amount.
It there some different logic to do variance calculation for PO involving main product which have co-products in it.
Thanks for any inputs
kamala -
Production variances run daily?
Our production accountant has requested variance analysis on a daily basis in order to get up to date information for the factory staff.
We are using costing by period with product cost collectors and currently run overhead / WIP / variance calculation / settlement each week (in a four week financial period).
Most of the large variances that occur are due to mistakes in production order confirmations and the accountant's idea is that these can be corrected more quickly if the variance information is made available each day.
Does anyone have any experience of having done this?
We have WIP calculation run times which are quite long, but the variance calculation runs quite quickly so I don't think performance will be a problem.
thanks
MarkHi Ajay. Thanks for your response. In many companies what you say would make sense, although for us it is not so important. We only allocate overheads based on a fixed percentage (of other costs) each period and do not take into account the real departmental costs.
We are mainly interested in the variances which occur in production and these are usually due to confirmations being made incorrectly. For example, confirmations being entered with longer run times (i.e. activity types) than is really the case.
Another typical example is where operation 20 has been confirmed but operation 10 has not. This gives the impression of a good production run as the goods issue (via backflush) of material components of operation 10 has not happened leaving the material cost much lower than is really the case.
best regards
Mark -
COPA Configuration for settlement of Production Variances
Hi,
Can anybody explain me detail configuration steps required to settle production variances to COPA in case of Make to Stock Scenario.
Helpful answers will be rewarded with points.
Regards
Milind NairHi
These are broadly the requirements for settling production variances:
1.) The production variances first need to be calculated in CO-PC.
2. Your PA transfer structure must contain assignments of variance categories to COPA value fields.
3. In the settlement profile, you define the variances to be settled and profitability segments should be a valid receiver.
4. The settlement rule to profitability segments is created automatically based on the information available in the production order (product, product group, plant and so on).
5. You must have maintained number ranges for record type "C".
6. The desired form of Profitability Analysis (costing based) must be active in the relevant controlling area.
Hope this is useful
S Jayaram -
Cost elements set in KEI1 A1 Settle Production Variances?
Dear Experts,
What kinds of cost elements would be set in KEI1 If the PA transfer str. is A1Settle Production Variances?
10 Input price variance
20 Input quantity variance
30 Resource-usage variance
40 Remaining input variance
50 Mixed-price variance
60 Output price variance
70 Lot size-/fixed-cost variance
80 Remaining variance
90 Scrap
Could i say "cost elements that we can see when we do KKS1 variance caluation?
Or else?
Thanks in advance.Hello,
You NEVER assign cost elements to value fields for mapping the settlement in COPA. Instead of that what you do is in the source tab for the line (eg 10 Scrap) select the radio button called ' varainces on production orders' and input the appropriate variance category eg. eg SCRP. In value field tab you would assign the appropriate value field. There is no need to assign cost elements. When you execute variance calculation the information is captured in the following fields and the same flow to COPA when you assign the variance category to value fields.
PRIV Input Price Variance
QTYV Input Quantity Variance
RSUV Resource-Usage Variance
INPV Remaining Input Variance
MXPV Mixed-Price Variance
OPPV Output Price Variance
LSFV Lot Size Variance/Fixed-Cost Variance
REMV Remaining Variance
SCRP Scrap
The variance calculation is not just a simple difference between the cost elements it is also related to quantity as well.
Kind Regards // Shaubhik -
Variance calculation repport (KKS2) different to variance line items (KOB3)
Hi, need your help.
I´ve run variance calculation (KKS2) for one production order, one target cost version and it has calculated correctly all cost element variances. However, when I display variance line items (KOB3) for this order with the same target cost version used in KKS2, calculation is´t correct for all cost element and if I compare it with KKS2 repport, it displays different values. Does anyone know why?
some details that may help:
WIP is customize
The company I´am working for had activated "write line Items" (OKV1) after the golive,
Scrap check box is activate in variance key,
All variance categories are activate,
etcetera
Thank you for your help.
Regards,
AndréHi
I would suggest raise an OSS msg then.. Because i dont see any possible reason why this could happen
In my case, the only discrepancy I found was variance doc was posted to FI and not to COPA because the user did not execute variance calculation in update mode.. So, variance got posted in FI, but not in COPA...
But the posted values always matched in my case,,,
Do update us incase you find solution
Regards
Ajay M -
Variance Calculation In Process order
Dear All Gurus,
We have produt cost by order.
In process order variance calculation I am gatting variance being calculated on Input v/s output costs.
While settlement also same variance is being posted.
I want variance to be calculated target v/s Actual
Please advice
Thanks in advance
BhushanI think in production order the variance is calculated between actual costs vs planned costs which is nothing but the input costs minus the gr coss of material produced at std costs.
Is that happenning or not??
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