Manufacturing Variance Account In Cost Component Structure

[sanjay_ram]

Hi,

May i know if we need to include the manufacturing variance account in cost component structures? If yes should we label it as "Manufacturing Variance"? Please advise.

[kamalkumar_biswas2 · Accepted solution]

Hi Sanjay

You need not to include variance in CCS...

1. In standard cost there is no question of variance..

2. In actual cost if ML/Actual costing is active during ML run all differences in various levels are absorbed in product level...so CCS does not need variance to assign

Kamal

[sanjay_ram · Accepted solution]

Yeah you are right about the ML variance but for standard costs why do you say there will not be manufacturing variance? Sure there will be because the actual costs of the production order will be different from the standard price of the FG.

[kamalkumar_biswas2 · Accepted solution]

Hi Sanjay

That is not standard cost..that is diff between GR (valuated at standard cost) and actual Debit posted in Order. So that diff is actual cost difference which at the time of settlement will post to PRD a/c and during ML run will distribute between consumption and inventory to make your material value actual and PRD will be 0....

I think you are clear now.

kamal

[sanjay_ram · Accepted solution]

Thanks so that is called Manufacturing variance, so you are saying that should not be in the cost component structures. Am i right?

[kamalkumar_biswas2 · Accepted solution]

Yes

If you are satisfied pl close the thread

Kamal

[sanjay_ram · Accepted solution]

Yes done, thank you.

[sanjay_ram · Accepted solution]

Hi Kamal,

We are missing something here, i see in CKM3N cost component break down view, the system can actually show the total of the cost components equals the standard price of the finished goods. How can it show this value if it is not capturing the manufacturing variance as part of the cost component structure? See the following picture :-

[kamalkumar_biswas2 · Accepted solution]

Sanjay

   Your FG GR value is at standard cost...so break up of that also at standard CCS..I don't understand where is the confusion?

   After ML run and closing entry if you see the actual CCS view of FG will find actual cost break up considering Price difference effect.

   What you have analyse is before ML run and complete the closing activity.

   Kamal

[sanjay_ram · Accepted solution]

Hi Kamal,

But did you see my excel file cost component total which is at 55 dollars? but the standard cost of the FG is at 20 dollars so they do not match with each other.

I think the system will scale down the 55 dollars to 20 dollars for cost component view at standard costs and only then the total of the cost components will match with that of the 20 dollars.

Please confirm.

[kamalkumar_biswas2 · Accepted solution]

Hi Sanjay

   I got your point....when you see the GR value at order level it is 20 (standard cost) and break up also as per CCS standard

   Now when you run the CKMLCP the diff (variances) goes to your product and makes it 55 ..so becomes Actual Cost and CCS of actual is equal to 55...system automatically takes care of that variances either coming from material consumption or activity for which you have defined CE in CCS..so no need of any further assignment of CE for variances.

  Now ..is it clear.

Kamal

[sanjay_ram · Accepted solution]

Hi Kamal,

Yes it does break up the standard cost of 20 into cost components and i believe the way it is doing it by scaling the original cost component of 55 down to 20 dollars by using a ratio of 55:20.

Am i right to say here that the system is actually scaling the values because the original cost component values are already at actual value of 55?

Please confirm this scaling matter.

[kamalkumar_biswas2 · Accepted solution]

Hi

Yes...now you are going to right direction...

kamal

[jason_shao]

Hello Ram,

Do you mean in T-code OKTZ?

You can create a cost component structure and the associated cost components. The cost component split is generated on the basis of the cost components. These settings are used for:

Material cost estimates
Sales order cost estimates created with the functions of product costing
Order BOM cost estimates
Easy Cost Planning

But normally we do not see "manufacturing variance account" is assigned here.

Best regards,

Jason