What is the difference between the use of 'Actual Cost' vs. 'Standard Cost'

Document ID : KB000026879
Last Modified Date : 14/02/2018
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Description:

What is the difference between the use of 'Actual Cost' vs. 'Standard Cost' fields defined on a Rate Matrix? 

Solution:

The Rate Matrix rows have three fields that can have a 'rate' value: Rate, Standard Cost, Actual Cost.  Where are these values used in the Financial Module?

Rate Matrix Row

RATE:
The billing rate to be applied to a transaction. This is the value that is applied for billing (revenue).  This rate is used in Cost Plan population to compute the 'Revenue'.

STANDARD COST:
The standard cost associated with any transaction matching the criteria established in the rate matrix. It can also be used in the definition of a Cost Plus Code. It may be used in developing user-defined cost reporting.

ACTUAL COST:
The actual cost associated with any transaction matching the criteria established in the rate matrix. This is the value that is extend through the costing fields in the system, including the scheduling tools.  It can also be sued in the definition of a Cost Plus Code. This rate is also used in the Cost Plan population to compute the (Planned) 'Cost'.

COST PLUS CODE:
The cost plus code is used in computing costs applied to the 'Actual Cost' or 'Standard Cost' on actual transactions posted into WIP. See related documentation on Financial Management Setup for Cost Plus Codes.  

Simple Example: (Without the use of Cost Plus Codes)

For a project that uses the rates defined in the Rate Matrix shown above, the (Planned) 'Cost' is computed as 'Units x Actual Cost'.  The 'Revenue' is computed as 'Units x Rate'.

Cost Plan

Cost = [Units x Actual Cost] : 142.20 x 2.00 = 284.40

Revenue = [Units x Rate] : 142.20 x 200.00 = 28,440.00

In this example, the 'Actual Units' and 'Actual Cost' cells are blank because actual transactions have not yet been posted into WIP for this investment.  When the actual transactions are posted into WIP, the 'Actual Units' and 'Actual Cost' will come from the PPA_WIP record for which the amount is computed at the time of the transaction posting (or adjusted).

 

Related Information:
Reference TEC444466 : TECHNOTE: Worksheet Example for calculating PPA_WIP_VALUES? 

Reference TEC543637 : How to get cost data to populate in NBI_PROJECT_CURRENT_FACTS