Define Target Cost Versions

In this step you define how you want to calculate the target costs . Target costs are used in for the following purposes:

The scrap is valuated in the period-end closing activities when the variances are calculated.
The work in process is valuated during the period-end closing activities when the WIP is calculated.

The work in process and scrap are only valuated in target cost version 0. You must create a valuation variance for scrap and WIP in target cost version 0 for this purpose. In this valuation variant, you have specified which cost estimate (preliminary cost estimate for order or version-specific cost estimate , alternative cost estimate for material or current standard cost estimate for the material) is to be used to valuate the scrap and the work in process.

The variance calculation process calculates target costs so that the variances between the control costs and the planned costs have the same basis.

For example, if you compare the costs in the standard cost estimate for the material with the actual costs in the production order, the costs in the standard cost estimate are adjusted to the quantity that was delivered to inventory for the production order. This allows you to directly compare the target costs calculated on the basis of the standard cost estimate for the material with the actual costs for the actual quantity manufactured (less the work in process and scrap).

If you are using full settlement, you have the following options:

You compare the actual costs of a production order with the target costs calculated in the estimate for the material produced.
The planned costs in the standard cost estimate are converted to the yield to calculate the target costs. This is done by dividing the costs that depend on the lot size in the standard cost estimate by the costing lot size and multiplying the result by the yield.
If the delivery of the material to inventory was valuated with the standard price, total target costs equal the credit posting on the order at the time of delivery (that is, the actual credit equals the target credit ). The total variances equal the difference for which a posting is generated on a price difference account during settlement.
For this version, select actual costs as the control costs and standard cost estimate as the target costs.
You compare the actual costs with the target costs of a production order.
The planned costs in the production order are converted to the yield to calculate the target costs. To do this, the costs that depend on the lot size are divided by the planned order quantity and multiplied by the quantity delivered.
For this version you choose actual costs as the control costs and planned costs as the target costs.
You compare the planned costs of the production order with the planned costs of the production order or process order, or you compare the costs calculated in a version-specific cost estimate with the target costs calculated in the standard cost estimate for the material being manufactured.
The costs in the standard cost estimate for the material are converted to the planned quantity in the order to calculate the target costs. To do this, the costs that depend on the lot size are divided by the costing lot size and multiplied by the planned order quantity.
For this version, select Planned costs / version-specific cost estimate as the control costs and Standard cost estimate as the target costs.
You compare the planned costs of the period calculated on the basis of a modified standard cost estimate with the actual costs of the period on the basis of the yield delivered to inventory in the period.
The base quantity for variance calculation is the yield.
For this version, you choose the actual costs as the control costs. and the alternative material cost estimate as the target costs. In the costing variant, enter variant PPC2 (modified standard cost estimate) and choose the corresponding costing version.

Through a target cost version you specify which data you want to compare. The target cost versioin also specifies which variance variant is used and therefore which catagories are calculated. You can define a different target cost version for each controlling area.

Requirements

You must already have processed the following steps:

Here you maintain a version in the General Version Maintenance and in the Settings in the controlling area. Only the versions created there can be defined in this step as a target cost version.

Standard settings

The standard system contains predefined target cost versions that you can copy into your own controlling area without having to make any changes.

Target cost version is the only target cost version that is relevant to settlement. That is, only the variances calculated with target cost version 0 can be settled to Financial Accounting, Profit Center Accounting, and Profitability Analysis.
Only in target cost version 0 can you specify a valuation variant for the valuation of scrap and work in process.

Actions

1. Check whether the predefined target cost versions meet your requirements.
2. To create your own target cost version, proceed as follows:
a) Choose New entries.
b) Enter the controlling area, a number, and a name for the new target cost version.
c) Enter a variance variant.
d) Select the control costs (planned costs or actual costs).
e) Select the target costs (planned costs or actual costs).
f) Specify a cost element group if necessary.
g) Save the target cost version.