Orders can only be selected for variance calculation if a variance key is entered in the order.

You can calculate variances either for the entire life of the object (cumulatively) or for a specific posting period (by period).

The decision whether variances are calculated cumulatively or by period used to be made in the variance key. Starting with Release 3.0C the decision is made through the default rule in the order type.

In the Product Cost by Order component, you can calculate variances cumulatively (default rule PP1) or by period (default rule PP2).

In the Product Cost by Period component, you always calculate variances by period.

- In cumulative variance calculation, the target costs are
calculated using the quantity that you delivered to stock for the
order. The actual costs refer to the entire life of the order.
Variance calculation requires that the order have the status
.*Final delivery*

- In variance calculation by period, the target costs are calculated on the basis of the quantity that you delivered to stock in the period. The actual costs refer only to the period in which you calculate variances. Variance calculation requires that a goods receipt was posted for the order in the period. If this is not the case, the system calculates only remaining variances.

The variance key specifies the following:

- Whether
**scrap**is calculated in addition to the variances

- Whether adocument is written containing the date, user name, and change made (line item)

The following requirements are necessary in order to calculate scrap:

- There must be a

**standard cost estimate**for the material

- This standard cost estimate must have a quantity structure

- In the Product Cost by Period component, the confirmation is made by operation and not at the order header level, or reporting points were registered

The variance key is entered in the master data of the order in the following way:

- When you create a material master record, the system proposes a variance key through the plant.

- When you create a
**production order**or**process order**to manufacture this material, the system proposes a variance key through the entry in the material master record.

- When you create a
**run schedule header**to manufacture this material, the system writes this variance key to the**production cost collector**.

**Requirements**

Through the default rule for the order type, you already specified whether the variances are calculated cumulatively or by period (periodic settlement).

**Standard Settings**

The standard system contains predefined variance keys for production orders and run schedule headers that you can use without making any changes.

**Actions**

Check whether the existing variance keys meet your requirements. If you require your own variance keys, proceed as follows:

1. Choose *New
entries* and enter a number and a name for the new
variance key.

2. Specify whether scrap should be
calculated separately.

3. Specify whether a document should
be written with information on variance calculation.

4. Save the variance key.

5. Go to the menu option