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Variance Calculation ------------------------------------------------------------------------------------------------------Variance Calculation Use You can calculate variances for the following objects:

Product cost collectors Manufacturing orders Cost object hierarchies

Variance calculation provides you with detailed cost information on products or manufacturing orders. The variance calculation function does the following:

Shows the variance between target costs and control costs (the control costs can be the net actual costs, for example) Determines the difference between the actual costs debited to the object and the credit from goods receipts (total variance) Valuates the unplanned scrap quantities with target costs to determine the scrap variances Determines production variances and planning variances for informational purposes Shows the causes of the variances and assigns the variances to different variance categories depending on the cause

The system updates the variances by object for each cost element, or for each cost element and origin. Variance calculation provides you with the information you need before you can take steps to improve your cost situation. Good issue + Confirmation + Overhead - GR of finished material is Variance. Suppose Raw material price is 100, Confirm is 50 (labor, Power), Overhead 10. But when you do GR in SAP system do GR on Material current price in master, if it is say 150 Now variance is 10. When you do Settlement the Order Update this variance to Material, Material value is update to 160. Variances can only be determined once the order has been delivered (DEL) or technically completed (TECO), as the quantity actually delivered is fixed. This quantity determines the target costs of the production order and thus the variances per piece. This means that WIP and variances cannot be calculated at the same time. -----------------------------------------------------------------------------------------------------------------------------------------Created by: - Devidas Karad SAP PPPI Certified Consultant E-mail:- devidas.karad@gmail.com

Variance Calculation ------------------------------------------------------------------------------------------------------WIP is only calculated for released orders (REL) and variances for orders that have been technically completed (TECO) or delivered (DEL) If you are using Product Cost by Sales Order with the non valuated sales order stock, you cannot reliably determine any variances for the assigned production orders and process orders. Therefore, in this case, the system does not support the variance determination, and you need to use the valuated sales order stock instead. Variance calculation provides you with detailed cost information on products or manufacturing orders. The variance calculation function does the following: - Shows the variance between target costs and control costs (the control costs can be the net actual costs, for example) - Determines the difference between the actual costs debited to the object and the credit from goods receipts (total variance) - Valuates the unplanned scrap quantities with target costs to determine the scrap variances - Determines production variances and planning variances for informational purposes - Shows the causes of the variances and assigns the variances to different variance categories depending on the cause Order settlement functionally T code KO88 To Settle the Variance onto material or other account (PRD) Settlement is done. The status of a production order in this scenario determines whether that production order is settled and thus credited or not. The actual costs of the production order are only settled if the order has been technically completed (TECO) or delivered (DEL). For orders that have been released (REL), settlement only posts the WIP to FI (if any WIP was determined). Each time goods are received into inventory, the system valuates the receipt and credits the product cost collector or manufacturing order accordingly. The actual costs posted to an order can be more or less than the value with which an order was credited when the goods receipt was posted. When you settle, this difference between the debit and credit of the order is transferred to Financial Accounting (FI). Settlement also feeds data from Cost Object Controlling to other components.

-----------------------------------------------------------------------------------------------------------------------------------------Created by: - Devidas Karad SAP PPPI Certified Consultant E-mail:- devidas.karad@gmail.com

Variance Calculation ------------------------------------------------------------------------------------------------------Scenario :- Standard cost is released by costing run and is updated in material master

Production order is created with 1 quantity

-----------------------------------------------------------------------------------------------------------------------------------------Created by: - Devidas Karad SAP PPPI Certified Consultant E-mail:- devidas.karad@gmail.com

Variance Calculation ------------------------------------------------------------------------------------------------------In the cost analysis of production order planned costs are updated

In the confirmation screen when you press actual data all actual values of material and activities get displayed

-----------------------------------------------------------------------------------------------------------------------------------------Created by: - Devidas Karad SAP PPPI Certified Consultant E-mail:- devidas.karad@gmail.com

Variance Calculation ------------------------------------------------------------------------------------------------------Now suppose we have required more activity timings, so we have changed, confirmation is saved

-----------------------------------------------------------------------------------------------------------------------------------------Created by: - Devidas Karad SAP PPPI Certified Consultant E-mail:- devidas.karad@gmail.com

Variance Calculation ------------------------------------------------------------------------------------------------------Now costs of material movement and activities get updated in order cost analysis

Goods receipt carried out for order

-----------------------------------------------------------------------------------------------------------------------------------------Created by: - Devidas Karad SAP PPPI Certified Consultant E-mail:- devidas.karad@gmail.com

Variance Calculation ------------------------------------------------------------------------------------------------------Now again cost is updated when goods receipt is done

-----------------------------------------------------------------------------------------------------------------------------------------Created by: - Devidas Karad SAP PPPI Certified Consultant E-mail:- devidas.karad@gmail.com

Variance Calculation ------------------------------------------------------------------------------------------------------Now go to KKS2 to carry out variance calculation for order Variance = Good issue + Confirmation + Overhead - GR of finished material = 2 + 108.96 + 0 74.61 = 36.35 i. e. Variance = Difference between Planned cost and Actual Cost

Now order settlement is carried out in KO88 and you will see the settled value

-----------------------------------------------------------------------------------------------------------------------------------------Created by: - Devidas Karad SAP PPPI Certified Consultant E-mail:- devidas.karad@gmail.com

Variance Calculation -------------------------------------------------------------------------------------------------------

When you click on accounting document and chose FI document you will see price difference account is debited

Now go to material master accounting view, you will see change in moving price for the material Standard price + Variance amount / Total Stock = 74.61 + 36.35 / 1 = 110.96

-----------------------------------------------------------------------------------------------------------------------------------------Created by: - Devidas Karad SAP PPPI Certified Consultant E-mail:- devidas.karad@gmail.com