Variance is settling to Material

Hi All
This is a MTO Scenario where the difference between target cost and actual cost is settling on the material.
Actual cost is less than the target cost - this variance is settling on the material and thus there is an increase in cost.
Say For Eg. Target cost is Rs 50, Actual cost is Rs 30 (raw materialactivity cost). The variance of Rs 20 is again settling on material and the material is showing actual price as Rs 50 (Raw materialactivity cost+variance)
Actual price should be 30 and not 50.
Rs. 20 is getting posted to FI too as price gain variance.
The settlement rule is - settle 100% to Material.
Is this standard SAP ?  Does variance gets settled to Material ? shouldnt it be settled to cost center ?
Material has V (Moving Average Price) Indicator.
COPA Is not activated.
Edited by: Khyati Patel on Nov 8, 2011 4:55 PM
Edited by: Khyati Patel on Nov 9, 2011 7:32 AM
Edited by: Khyati Patel on Nov 9, 2011 7:33 AM

Hi Kyathi,
If the M2O production/process order is for non valuated sales order stock, settlement receiver is SDI (Sales order). if COPA is active, in Sales order, settlement receiver is Profitability segment.
If the M2O is for valuated sales order stock, my understaing is settlement receiver is MAT (material) only. if COPA is active, settlement receiver can also be Profitability segment in addition to MAT. My understanding is that Production order varinaces will not go to Sales Order in this case.  
Let m eknow if you need any further details.
Thanks & Regards,
ADI

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