WIP calculation using target cost vs Actual Cost

[Former Member]

Hello Gurus,

For calculating WIP in Product cost by period using product cost collector SAP recommends (or mandatory) valutaion through Target cost, while in the case of product cost by order using manufacturing orders valuation through Actual cost.

Any one know, why its like this, why cant we use <b>valuation through actual cost in case of product cost by period</b> ( Well there is no choice for this configuration, so there must be some reason for this)

Any help is appeicated

[Former Member]

Hello Krishna,

This is becasue, in case of Repetitive and contineous 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 recomments 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 effeciency of particular production dept. and take initiatives or actions. Hence It recomments to calculate based on Actual cost.

This is my opinoion or understanding from business point of view.

Please let me know if I am wrong.

Thank you,

Regards,

Santosh Kumar V