What is actual costing in SAP CO-PC - Product Cost Controlling?

SAP Term: actual costing

• Component: CO-PC

• Component Name: Product Cost Controlling

• Description: Alternative to standard cost accounting that enables you to assign the costs incurred in the period directly to your materials. Materials are valuated at a preliminary standard price which is then adjusted to reflect the difference between the preliminary price and actual cost. Each transaction that is relevant to valuation such as a goods receipt, invoice receipt, or production order settlement records the preliminary standard price and the variances against that price such as price differences and exchange rate differences. At the end of the period, you assign these variances to the material inventories and consumption of the previous period across multiple production levels. Material valuation is therefore based on the periodic actual costs.

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• Key Concepts: 
   Actual costing is a method of product cost controlling in SAP's CO-PC module. It is used to calculate the actual costs of a product or service based on the actual costs incurred during production. This includes direct materials, direct labor, and overhead costs. The actual costs are then compared to the planned costs to determine the variance. 
  
  How to use it: 
   Actual costing is used to calculate the actual costs of a product or service based on the actual costs incurred during production. This includes direct materials, direct labor, and overhead costs. The actual costs are then compared to the planned costs to determine the variance. The variance can then be used to adjust future production plans and budgets. 
  
  Tips & Tricks: 
   When using actual costing, it is important to ensure that all costs are accurately tracked and recorded. This includes both direct and indirect costs such as materials, labor, and overhead. Additionally, it is important to ensure that all cost elements are properly allocated to the correct cost objects. 
  
  Related Information: 
   Actual costing is closely related to other methods of product cost controlling such as standard costing and target costing. Standard costing is used to calculate the expected cost of a product or service based on predetermined standards while target costing is used to set a target cost for a product or service before production begins.