Target cost calculation

Question

Hi All,
In the production order, when we displays the cost analysis, we get Target cost. Can anyone please explain how the target cost for indirect activity allocation (ex:Machine hrs,Wage hrs etc.,) is calculated? I mean is there any specific formula or calculation involved in the same?

Answer 1

Hi,
In production order (CO03 --> Cost analysis) I want to know what different between Target cost & Plan cost & Actual cost?
Total Plan Cost = Std Cost the material required to Produce X Planned Qty of the required material
Target Cost = Std Cost the material planned to Produce X Std Qty of material required to produce, for Produced Actual Qty
Actual Cost = Std Cost the material planned to Produce X Actual Qty of material consumed, for Produced Actual Qty
For Example : Final Material - A,- Qty Planned to Produce - 2 nos
As per Standards, Below Qty of Materials required to Produce A , for 2 Nos
Mat B - 2Nos X INR 50 = INR 100
Mat C - 4Nos X INR 60 = INR 240
Activity Cost = 2 hrs X INR 10 = INR 20
Total Plan Cost = INR 360
Actual Qty Produced = 1 No
Actual Consumption is as follows .
Mat B - 1.5 Nos ( X INR 50 = INR 75 )
Mat C - 2 Nos ( X INR 60 = INR 120 )
Activity Cost = 2 hrs ( X INR 10 = INR 20 )
So, Actual Cost = INR 7512020 = INR 215
Whereas, Target cost for the Actual Qty ( of Product A - 1 Ns) is , as follows,
Mat B - 1 Nos ( X INR 50 = INR 50 )
Mat C - 1.5 Nos ( X INR 60 = INR 90 )
Activity Cost = 1 hrs ( X INR 10 = INR 10 )
Therefore, Target cost = INR 509010 = INR 150