You define the parameters which control the calculation of variances in process costing under the "Cost object process costing" menu option. These parameters have to be maintained if you are working with cost object hierarchies.
You create cost object IDs which are linked together in a hierarchy. You assign materials to the lowest nodes of the hierarchy. Production orders are created for these materials.
The planned costs are calculated at the level of the individual production orders or using the standard cost estimates for the relevant materials. The actual costs can either be posted to the production orders or the cost object IDs.
The data in this hierarchy is summarized when variances are calculated. Variances are calculated for each order and for each cost object ID.
The structure of this summarization hierarchy is defined via a pre-defined hierarchy ID which you have to generate before you can calculate variances. (See Summarization Process Costing)
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