For calculating WIP in Product cost by period using product cost collector SAP recommends

(or mandatory) valuation through Target cost, while in the case of product cost by order
using manufacturing orders valuation through Actual cost.

This is because, in case of Repetitive and continuous manufacturing, we use product cost
collector and it is very difficult to monitor actual costs and also there will not be much
differences by order wise cost. Hence it recommends to take value WIP at target cost.
In case of Order based manufacturing that is each order has vary with the requirements of
quantities required and output. It is very important to know the actual cost by order to monitor
the efficiency of particular production dept. and take initiatives or actions. Hence It
recommends to calculate based on Actual.
Work in process at actual costs is calculated as the difference between the debits for
material withdrawals, internal activity allocations, external activities, and overhead costs (that
is, the actual costs assigned to the object) and the actual credits from goods receipts for
delivery to stock.