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production order and cost

Hi,

I need advice on target vs actual in production order.

give simple scenario.

say costing run on FG on 2012-06-01 which costed at $3 per piece and the BOM is raw1 = $1, raw2 = $2.

on 2012-09-01, same FG now costed at $3.50 per piece and the BOM is raw1 = $1.20, raw2 = $2.30.

output to produce 1000 pieces.

1) raw materials issued to production order is considered as actual cost or product produced received from production order as actual cost OR

 

2) raw materials issued to production order is considered as target cost or product produced received from production order as target cost.

thanks

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