hi
Activity type represents activities like Labor hrs, Machine Hrs in manufacturing
In Kp26 you can enter plan activity qty i.e. How much of labor hrs you intend to generate in a plan period
This qty of labor hrs can be used to divide the planned expenses in Labor wages cost element in kp06 to derive the Labor hr rate. This rate is used during Costing estimate Ck11n
There are some nice documents posted in Controlling forum on Basics of Standard Costing. Always search before you post, you will save your time
Ajay M