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fixed cost & variable cost

HI Friends,

in production order what is the fixed cost and what is the variable cost.

regards

Arun kumar

replied

Hi Arun,

Fixed Price are those expenditures which remains constant in total amount irrespective of change in Volume of production.Eg Rent will be constant even if your production volume changes.The activity price calculated for such expenditures will also be constant per activity rate even if there is a change in the volume of production.

Varriable price on the other hand changes with the volume of production .e.g power cost will change if you produce more.the the activity rate say KWH/ton will also change and its price will also change if you produce more.

Generally activities for service center fixed costs will yield fixed price.

Once you are done with planning in KP26.these plan amounts are used for standard cost estimate.when you are doing standard cost estimate, cost will calculated from BOM(Materials cost) and Routing(here you have activitype plan cost/hr.no.of hrs to finish goods).

once you are with standard cost estimate it will update material master.

To calculate variances(target costs Vs Actual cost),we use target cost.target cost is nothing but your standard cost estimate cost for that particular materials(Finished or Semi -Finished).you can check this in OKV6 T.code

Here is a link from SAP help

http://help.sap.com/saphelp_47x200/helpdata/en/eb/13771c43c411d1896f0000e8322d00/frameset.htm

Hope this helps

Regards,

R.Brahmankar

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