Terminology in Product Cost Controlling 

Note how the following terms are used in Product Cost Controlling:

Cost Terminology in Product Cost Controlling

 

Standard costs

In manufacturing enterprises, standard costs are calculated in the following ways:

In make-to-stock production, the standard cost of a material is calculated in a standard cost estimate for the material
(cost estimate with quantity structure; cost estimate without quantity structure).

You create the standard cost estimate for a material in the application component Product Cost Planning.

The standard cost estimate for a material is normally created at the beginning of each fiscal year. In Cost Object
Controlling, a standard cost is a predetermination of what the cost should be. This means that actual cost
should not exceed standard cost. When variances are determined in the period-end closing process of Cost
Object Controlling, standard costs are used as the basis for calculating target costs.

The total standard cost of a material can be written to the material master record as the standard price and
used to valuate the material during the year. (See also: Basic Decisions in Cost Object Controlling)

In sales-order-related production when you are using a valuated sales order stock, standard cost is determined
according to a predefined strategy sequence (see also: Valuated Sales Order Stock: Valuation; Standard Price with
Valuated Sales Order Stocks).
 The total standard cost can be updated to the stock segment of a make-to-order material as the standard price
and used to valuate the sales order stock.

Planned costs

Preliminary costing of cost objects calculates planned costs. Preliminary costing is part of the application component
Cost Object Controlling.

Target costs

A target cost is a type of planned cost that is converted to a reference quantity such as the quantity produced (yield).
This conversion can be performed at various points such as when the variances are calculated. Target costs can be
calculated on the basis of standard costs or planned costs.

Target costs can also play a part in functions other than variance calculation, such as when the value of unfinished
goods (work in process) is calculated in Product Cost by Period (see also: Work in Process in Product Cost by Period)
or when actual costs are distributed in cost object hierarchies (see also: Actual Cost Distribution in Cost Object
Hierarchies).

Modified standard cost estimate

A modified standard cost estimate is an alternative material cost estimate.

Current cost estimate

Like the modified standard cost estimate, the current cost estimate is an alternative material cost estimate that you
can create in the application component Product Cost Planning.

Actual costs

Actual costs are the costs that were actually incurred.

Actual costing

In the R/3 System you perform actual costing in the application component Actual Costing/Material Ledger (CO-
PC-ACT).

Simultaneous costing

Process in which the actual costs incurred for a cost object are written to the cost object.

Simultaneous costing makes it possible to see and analyze the actual costs for a cost object at any time.

Final costing

Final costing is performed during the period-end closing activities. The entails the following:

Allocation of period costs (template allocation, revaluation at actual prices, overhead calculation)
Calculation of work in process and variances (target/actual comparisons)
Transfer of data to other application components (such as the work in process to Financial Accounting)