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  • Purchasing Price Variance (PPV) in SAP

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    kkka Tt
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    This document discusses how purchasing price variances (PPV) are calculated in SAP. PPV measures the difference between the standard cost and actual purchase price of materials. The document provides an example where the standard cost is $10/lb, the purchase order price is $11/lb, and the actual invoice price is $12/lb. It demonstrates how the PPV is calculated at goods receipt when the purchase order price differs from standard cost, and again at invoice receipt when the invoice price differs from the purchase order price. The net PPV is the difference between standard cost and invoice price. The document also mentions how the net PPV can be viewed in an SAP report.

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    Purchasing Price Variance (PPV)

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    This document discusses how purchasing price variances (PPV) are calculated in SAP. PPV measures the difference between the standard cost and actual purchase price of materials. The document provides an example where the standard cost is $10/lb, the purchase order price is $11/lb, and the actual invoice price is $12/lb. It demonstrates how the PPV is calculated at goods receipt when the purchase order price differs from standard cost, and again at invoice receipt when the invoice price differs from the purchase order price. The net PPV is the difference between standard cost and invoice price. The document also mentions how the net PPV can be viewed in an SAP report.

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    © All Rights Reserved
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    442 views6 pages

    Purchasing Price Variance (PPV) in SAP

    Uploaded by

    kkka Tt
    This document discusses how purchasing price variances (PPV) are calculated in SAP. PPV measures the difference between the standard cost and actual purchase price of materials. The document provides an example where the standard cost is $10/lb, the purchase order price is $11/lb, and the actual invoice price is $12/lb. It demonstrates how the PPV is calculated at goods receipt when the purchase order price differs from standard cost, and again at invoice receipt when the invoice price differs from the purchase order price. The net PPV is the difference between standard cost and invoice price. The document also mentions how the net PPV can be viewed in an SAP report.

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    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
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    of 6

    SAP SUPPORT

    ON DEMAND ASSISTANCE
    RESOURCES

    LOGIN (HTTP://APP.ERPFIXERS.COM/LOGIN)

    March 22, 2016 (/blog/ppv-in-sap)


    Search

    Purchasing Price Variance (PPV) in SAP (htt (htt (htt

    (/blog/ppv-in-sap)
    Angel Reyes (/blog?author=5787c4176b8f5b162da23bea)
    H AV E A S I M I L A R
    SAP QUESTION?
    Overview
    The aim of this post is to show how price variance is calculated in a context of POST A REQ
    (HTTP://APP.ERPFIXERS.CO
    standard cost.

    Standard cost is an agreement between Engineering and Finance areas, regarding the
    price of raw materials and operative supplies, this estimated price is a key input to
    calculate gross margins.

    GET MORE
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    The Purchasing Price Variance or PPV is a warning flag that says that the gross margin
    will have variance, taking care about the situation, on a nimble way, enable the
    organization to keep margins going forward.

    Our scenario is built it to buy 1,000 LB of raw material, where:


    • Standard Cost is 10 USD per LB
    • Order Price is 11 USD per LB
    • Actual Price is 12 USD per LB

    Standard Price
    First of all, we have our raw material master data created:

    Purchase Order Price


    Then, we create an order; price is above our estimated standard price:
    PPV at Goods Receipt
    Now, lets assume that we had received the material before the invoice, so a difference
    is calculated:

    PPV during GR = Standard Price – PO Price

    The journal entry for this GR is:

    Inventory Account DR 10,000 USD Standard Price


    GR/IR Account CR 11,000 USD PO Price
    PPV Account DR 1,000 USD Balance

    PPV at Invoice Receipt


    Now, when invoice is received, we realize that market change and now, the actual
    price is different than the PO price

    PPV during IR = PO Price – IR Price

    Journal entry is:


    Vendor CR 12,000 USD Actual Price
    GR/IR Account DR 11,000 USD PO Price
    PPV Account DR 1,000 USD Balance

    This means that the net PPV is:

    Net PPV = Standard Price – IR Price = 10 – 12 = -2 USD per LB

    This is an unfavorable Purchasing Price Variance.

    Net PPV
    Now, on SAP there is a report that can be customized (configured) to get this Net PPV,
    this is:
    You can use transaction MC$G, to get the report with data related to PPV. This is
    infostructucture S012 that can be enhanced to take advantage of Logistics
    Information System features, or a simple query using structure S012 can be created.

    (/blog?author=5787c4176b8f5b162da23bea)

    Author: Angel Reyes (/blog?author=5787c4176b8f5b162da23bea)


    Angel Reyes has 15+ years of consultancy experience on ERP's, specifically SAP. Hands-on in
    software development, functional duties; from programming to solution architecture. I have
    great skills to understand and communicate Customer's requirements at any level.

    Module(s): Financial Accounting, Materials Management (MM), Supply Chain Management


    (SCM)

    Tagged: Puchasing (/blog?tag=Puchasing), Invoice Verification


    (/blog?tag=Invoice+Verification), Logistics Information System
    (/blog?tag=Logistics+Information+System), Report (/blog?
    tag=Report), PPV (/blog?tag=PPV), Variance (/blog?
    tag=Variance), LIS (/blog?tag=LIS)

     6 Likes  Share

    COMMENTS (1) Newest First Subscribe via e-mail

    Preview POST COMMENT…

    Muhammad Umar A year ago · 0 Likes

    Thank you so much!! Can you also tell how this PPV is allocated to each
    material?
    Newer Post Older Post
    Restricting Range in Selection Option Copy All Records From One Column in
    (/blog/2016/3/23/restricting-range-in- ALV Layout
    selection-option) (/blog/2016/3/22/ymvtjhr6uqcz14p9hc7rh3c3duz9jw)

    (htt (htt (htt

    ABOUT (/ABOUT)
    M O D U L E S L I ST ( / M O D U L E S - L I ST )
    BE A FIXER (/BE-A-FIXER)
    L O G I N ( H T T P : / / A P P. E R P F I X E R S . C O M / L O G I N )

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