Target cost, planned cost, actual cost difference

Question

Hi!
As per my understanding , the target cost, planned cost, actual will be calculated like blow:
Actual cost = Actual quanity * Actual price ( standard price or moving average price) existed at the time of goods movement.
Planned cost = Planned quantity * Planned price ( standard price or moving average price) existed at the time of production order release based on valuation variant strategy.
Target cost = Planned Quantity * Actual price ( standard price or moving average price) when calculating variances.
whether above formulas are correct?
I have one scenario, where in process order, I am not seeing Planned quanity for compoenent/raw material, but target quanity is existed. How it is possible. When I have checked the BOM in process order, the BOM does not contain the componenet.
regs,
ramesh

Answer 1

Hi,
Target Cost = Costs as per the standard cost estimate * Actual Qty delivered.
For e.g. Std cost for one unit of material-x is as follows.
RM 1 - 10kg * 10 /-  = 100
Activity 1 - 5 Hr * 50 /-  = 250
If the actual delivery from the production is 2 units, then target cost will update as
Under Goods Issue, RM 1 - (10kg*2units) * 10 /- = 200
Under Confirmations, Activity 1 - (5 Hr*2units) * 50/- = 500
Total = 200+500 = 700
Target cost for goods issue/confirmation of activities will update only when the Goods receipt has been done but not at the time of goods issue or Confirmation of activities.
Target cost for Goods Receipt will update only when the variance has been calculated for the order.
Regards
MadhuSekhar Gupta G