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SAP Material Ledger Overview
SAP Material Ledger Overview
Introduction:
Material ledger (ML) is functionality in SAP, which helps to calculate Actual Cost for materials and also
provide the facility of multiple parallel valuations in multiple currencies. ML has two major functionalities,
first to calculate actual cost of materials, semi/finished goods, and second provide an opportunity to
calculate actual cost on multiple valuation such as Legal, Group, & Profit center valuation. In this
document we will see fundamental concept of material ledger, how the actual cost is calculated for
different business scenarios.
Material ledger works on a concept on first recording the material movement in Standard Cost and then
accumulating the Variance to calculate the Actual cost.
In Material ledger the benefit of standard cost is retained as all the materials movements are initially
recorded at Standard Cost and variances are collected to come to actual cost. Actual cost is calculated at
the end as part of Period End Closing, and the actual cost is termed as Periodic Unit Price (PUP).
Different Scenarios:
Step 3: Goods receipt: when we receipt the raw material, at that time we are not aware of our actual cost
of material then the initial recognition happened at Standard cost.
Stock of Raw material A/c ………….. Debit (Std. Cost * Actual Qty.)
To, GR/IR A/c… (Credit) (Std. Cost * Actual Qty.)
The value posted at GR is equals to (Std. Cost of raw material multiplied by Actual Quantity receipt)
Material ledger: at the time of good receipt, in material ledger there is an entry happened for receipt under
purchase, where entry happened for stock quantity & value is recognized as standard price.
Material ledger: at the time of invoice receipt the purchase price variance is recognized in material ledger
under zero quantity receipt, which increases the actual price of cumulative inventory. In some of cases we
can also see exchange rate variances at time of invoice receipt. Exchange rate variance generally arises
when the transaction currency is different than legal currency and average actual exchange rate is
different than budgeted exchange rate.
Raw Material Consumption A/c ……………… Dr. (Std. Cost * Actual Qty)
To, Stock of Raw material A/c ….. Cr (Std. Cost * Actual Qty)
In Controlling, Order should be debited with raw material consumption with a value equals to (Std. Cost *
Actual Qty).
In Material Ledger, consumption entries will happen for raw material with Consumption of Raw material
quantity as Actual quantity issue to order and value of consumption as (Std. Cost * Actual Qty).
Stock of Finished Goods A/c ………………… Dr. (Std Cost * Actual Qty) BSX
To, Finished Goods manufacture A/c (Std Cost * Actual Qty) GBB
In Controlling, order is credited with cost of finished goods manufactured i.e. (Std Cost of FG * Actual Qty
produced).
In Material Ledger, there will be entry in the receipt for finished goods. Inventory/volume in KG will
increased by quantity receipt during goods receipt and value will increased by (Standard cost of FG *
Actual Quantity receipt)
Step 2: Goods Issue to Customer; when goods issued to customer, in financial accounting the entries are
recorded for actual quantity sold @ Standard cost of finished goods.
Cost of Goods Sold A/c ………………………….. Dr. (Std. cost of FG * Actual Quantity)
To, Finished goods Inventory A/c (Std. cost of FG * Actual Quantity)
In Material ledger: goods issue to customer is recorded in material ledger as consumption of raw material.
The Actual quantity is recognized at standard cost.
Step 5: Period end closing: when we do period end closing activity in ML, the consumption is revaluated
with the different between actual cost (periodic unit price) and standard cost of finished goods. The price
difference & exchange rate difference are proportionately adjusted between consumption & closing
inventory.
Illustration:
To illustrate the scenario in more details, assume that we are manufacturing finished goods FGA, which is
made of raw material RM1 & RM2, and two activity X & Y are performed to convert raw material in
finished goods. In below table represent Plan standard cost of finished goods.
Table 1
Assume that we have created a production order to manufacture 10 kg of finished goods FGA. The
details of value which will be posted at different task like Goods issue, Activity confirmation & goods
receipt are given below. I have assumed actual quantity as different then plan quantity so that we can
check variances.
Table 2
Here we can see the total variance of 140 USD, basically represent quantity variance.
Table 3
Assumed, actual rate different than plan rate. Here we can see the calculation of lower level variance.
Conclusion:
With the help of this document I have tried to focus on basic functioning of material ledger with concept. It
will help to understand how the variances are moved from raw material, activity to finished goods & to
closing inventory and consumption.
Sarvottam Darshan
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Executive Summary:
From the time of Luca Pacioli, the father of accounting, till today, inventory valuation has been a point of
debate. In countries with stable inflation rate it is considered fine to have inventory valuated at standard cost.
In such countries material inventory values are normally carried by the SAP system in one currency with raw
materials valuated at moving average price and semi-finished and finished goods valuated at standard price. In
countries where currency is not stable and inflation rates are high it is pertinent to have inventory valuated at
actual costs. In such countries it might also be required to record inventory valuation in more than one
currency, usually a local currency and another more stable reporting currency like the USD to indicate the
inflationary impact on the inventory values. SAP supports this requirement of showing inventory valuation in
multiple currencies at actual cost using the functionality of material ledger and actual costing. This whitepaper
provides an overview of material ledger, actual costing, its setup in SAP and some known issues based on real
life project experiences.
Line item display of all transitions that have happened on the material
Ability to see the inventory value in more than one currency
Users can conduct a detailed material price analysis at any time as shown below:
SAP also provides a plethora of reports for business users in Actual Costing / Material Ledger Information
System.
OBYC Settings (Regular setup+ material ledger cost price difference setup etc)
Production Startup (CKMSTART): The expected results of a good material ledger production startup is
as shown below
Note: During material ledger and actual costing setup transaction code CKM9 is used as a key tool to ensure
the setup is technically fine at each step. Each element in this report should show (ok) as a confirmation for
the setup to be fine. All the checks except one are set ok once the above setups are correctly maintained. The
one check which does not come through the above setup is the “Involved in cost obj. Controlling” setup for
material ledger setup. This check automatically becomes active the moment the first cost object (Production
Order, process Order, cost collector) for the production process is created in SAP. A section of CKM9 result is
as shown below:
Setting Material Ledger Unproductive in Development and Quality servers OSS note 108374
Conclusion:
SAP’s material ledger functionality provides the ability to record inventory values in more than one currency
and indicates the inventory inflationary trends. Line item wise material transactions provide a meticulous
approach to conduct actual costing at period ends. It provides detailed information to users on the flow of
actual costs and the impact due to it. The functionality needs to be activated with caution as once activated in
production environment it cannot be deactivated.
References
Q&A: So, What's the Deal with
Material Ledger?
Paul Ovigele
Webcast
Q&A questions answered by ERPfixers expert Fixers Rogerio Faleiros & Paul
Ovigele.
A:Material Ledger is compulsory with S/4 HANA Finance, but Actual Costing is not.
When most people refer to Material Ledger, they are talking about Actual Costing, and
not Parallel Currencies/Valuation. With S/4 HANA you should configure any additional
currencies that you have, in the Material Ledger.
A: This varies from company to company. It also depends on how many plants are being
activated. In my experience it has taken between 6 weeks and 4 months. It is important to
copy your production system into a sandbox and do several test iterations before going
live with ML. This is where most of the time is spent. Once you are comfortable with the
results you will find that the live run can be done within a short window.
Q: Does material ledger work with materials valued at moving average price?
A: Yes it works very well, the ML setup, requires a customizing set and a material master
data set. If the ML is active and you have a material with moving average as price
determination, the behavior of the system will be the same as a company without material
ledger. the advantage on that is to get the ML reports active also for the moving average
materials, such as ckm3.
2) The price limiter quantity blocks the price difference to be absorbed by the material
3) Missing customizing for transfers
A: Yes, Material Ledger can be used for parallel valuation, parallel currencies and
transfer pricing, without the need for actual costing.
Q: What is the best where are you to get unit cost reports from ECC?
A: There are several reports in SAP to support the actual unit cost. With material ledger
"on" a quick report is s_P_99_410000062. also you can build own reports using KKML
functionality that is a drill down reports for material ledger, similar to what you get with
CO-PA.
A: I use to say that is not that material ledger is required, but actual costing is required.
So in this list I would add, Turkey, Russia, some latin American countries. One of the
main goals of material ledger is actual costing. but another big functionality is reporting.
So many companies are using ML for reporting purposes. Another functionality is to have
multiple material ledgers, it can be for legal requirements or even management.
A: Certainly the latest version of S/4 HANA (1610) makes Material Ledger required. Note
that this does not mean that you need to activate actual costing. Making material ledger
required means that during the conversion to S/4 HANA, the ML tables will be activated
and you can use parallel currencies/valuation. If you already have Actual Costing, this
will also be activated, but it is not compulsory if you do not have it.
A: Yes the ML is active by default in S4. this is to bring reporting functionality to MM.
the idea is if your company does not require or use actual costing, ML will act like in
ECC when you have ML for materials V2 or S2. It will add the reporting functionality but
no ML posting will happen.
Q: In the case you mentioned to use to create a global ledger to consolidate other
companies, ML will not impact your need.
A: Yes you can use ML is one plant andnot in another. ( ML Setup is by valuation area
and not by company. This is what will happen:
If you transfer from one plant to another ( both with ML) you can set ML to carry the
price differences from one plant to another.
If you transfer from one plant with to another without, a price difference will be posted in
the Key OBYC-AUM.
So no big issue in having ML in one site and no ML in another. The loss is that in the site
without ML you will not have ML reporting functionalities such as CKM3 and KKML0.
Q: Can you use material ledger in some companies but not in other companies and
still perform intercompany direct shipments or plant transfer? other companies use
standard cost.
A: Yes you can use ML is one plant andnot in another. (ML Setup is by valuation area
and not by company) this is what will happen.
If you transfer from one plant to another ( both with ML) you can set ML to carry the
price differences from one plant to another.
If you transfer from one plant with to another without, a price difference will be posted in
the Key OBYC-AUM.
So no big issue in having ML in one site and no ML in another. The loss is that in the site
without ML you will not have ML reporting functionalities such as CKM3 and KKML0.
A: It is advised by SAP to close Process Orders before activating material ledger. The
reason is because process order tables are not converted to ML tables ( the way PO
history tables are). therefore, if you do not close a process order before activating ML,
you could have some inconsistencies relating to parallel currencies/valuation. Please
note however, that based on some specific client requests, I have successfully activated
ML without closing all orders. Consider this to be a "Best Practice" advice, as opposed
to one which is absolutely required.
Q: What do you think are few specific key things that we need to keep in mind while
using ML pertaining to the type of Price Control - ML with MAP vs SP.
A: It depends on what you are using ML for. If you want to use it for parallel
currencies/valuation as well as actual costing, then you definitely need the materials
(semi-finished and finished) to be valued at standard cost (this is because moving
average price is already a type of actual cost). If you are only using ML for parallel
currencies/valuation, then you can have the materials valued at MAP only.
Q: What is the most important improvement in SAP when i update my system from
ECC 6.0 eph4 to Hana S4 in costing and ML?
A: There are several improvements: First it is much faster (of course!). Also, the steps of
single level PD, multilevel PD, Revaluation of Consumption, and WIP revaluation, are
all just one executable step. Also, the "Not Distributed" differences calculation logic has
been vastly improved. And it is easier to update the standard cost with the latest
calculated ML price.
Q: To start the ML function from existing single currency MM-setup, how will the
group or LC2 values be assigned? Using the Fx-table (OB08) or other method?
A: The currency definition of ML is OMX2. you can choose from company code and
controlling area currency, the FI currency it will take from the currency you have defined
for the company code, in new GL from additional currencies for company code. you can
also set different currencies in the customizing. It is important that at least one currency
is shared across all legal entities you want to set up material ledger. Usually as best
practice we set one of the currencies as the client currency, because this currency is
shared in all.
A: Yes, ML AVR (Alternative Valuation Run) can be used for US GAAP reporting. In fact,
one of its key strengths is to calculate a separate Actual Cost for a separate accounting
principle (such as IAS vs. US GAAP). It can be used for both management and financial
reporting. For example you can use it to "smooth out" the varying actual prices over
several months, or you can use it to update a separate CO version. You have the choice of
whether you want the results to be posted to FI or not.
2) The second you define in the material master data, which material would be relevant
for material ledger.
The materials relevant for material ledger must be set as Standard and price
determination = 3 that means level and multilevel. if you set it to = 2, it will show in ML
reports, but all price differences ML will not consider. You will have the same as a
company running the system without ML with price determination Standard. the gain you
have in this scenario is that you can still using the ML reports for these materials. It Will
show all value flow for the material.
For material with "V" no change as well, same behavior with or without, with the benefit
of getting the ML reports also for the "V" material when material ledger is active.
A: Yes, the question on process orders applies similarly to production orders as well. As
mentioned, it is a recommendation from SAP to close the orders, but from personal
experience (some customers kept orders open for several months at a time) I have found
that you can leave the orders open. I would recommend that, as part of your testing you
make sure that orders are settled as normal after your first ML conversion.
A: It depends. If you are using AVR to calculate actual costs for a different version (i.e. a
different accounting principle) then all the steps that are relevant in your normal ML run
should be relevant in your AVR run. Note however, that even in a normal ML run, you
may not find it necessary t use the WIP revaluation. In some countries it is required, but
from a management reporting perspective, it may not be.
A: When you are converting to ML, one of the critical steps is to make sure that the G/L
and ML are reconciled. The are tools in the conversion process to make sure that this is
the case (CKMADJUST, for example). However, if you remember that ML is simply a
subsidiary ledger for Material Movement transactions, then you will realize that if MM is
reconciled to the G/L, then ML is also reconciled to the G/L. I would recommend 2
reports: the standard one is MB5L, and the newer one is FAGL_MM_RECON.
Q: I use Group Valuation and simply defined Company Code as my partner for
Partner Cost Component Split. I also activated an additional controlling area
currency cost component split for the Legal Costing Variant. I would like to
compare Group Valuation.
A: One good option you have is to create a KKML0 report, with an enhancement to bring
cost component split. and with this you can define one column of the report for one
currency and second column for another currency. Standard way is only in ckm3n one by
one.
Q: Can we change CCS (add more CC) in a live ML/AC environment?
A: Yes you can change it. It is always a good point of discussion. A change in CCS is ok if
you follow some recommendations. For example, if your cost component is called ZA and
you want to add more components on that. It is not ok to change the Za component. What
you must do is:
1) Create a new CCS with validity date in the beginning of the period.
2) Calculate a new STANDARD for all products you have to be released in the new
period
4) Leave both CCS active. the date you define in validity will be used by SAP which CCS
is valid
5) When a new period is open in MMPV SAP will update the table CKMKEV with the
CCS that will be used in each period. so if you open the period an later send the
customizing it will fail
6) You DON'T need to delete old data, doing this way you will keep your history
Q: If we use actual costing and the ML-active how much processing time to most
companies add to the month-end jobs? Assuming we are using this for a
consumption inventory (purchased items only) rather than manufacturing?
A: This really depends on how many materials/plants you have in your system. To give a
rough guide (although every company is different), a client of mine (with mainly
purchased materials) has around 100,000 materials in around 20 plants, and the ML run
takes around 4 hours to complete.
Q: If using the Actual Costing process today for Brazil, Russia, and Turkey, will the
month-end closing steps continue to be necessary or will those types of activities
happen real-time?
A: If I understand correctly, I think you are asking whether any allocations that usually
happen at the end of the month will happen in realtime with Material Ledger activated. If
that is the case, the answer (for the most part) is no. Material Ledger does not eliminate
the need to run assessments, settlements, etc. at month end. In fact it relies on this data in
order to do a complete calculation. Please note that you can run material ledger before
the the month end as long as you do not execute the "Post Closing" step. That way you
can get a "feel" for where you will be at the end of the month. However, the information
will not be complete until all the month end activities have taken place.
Q: If we convert to the ML does all PO creation need to be stopped until the
conversion. Or if the inventory is frozen-locked from processing can service order
PO still be processed?
A: Hi, in the process of activating ML, you will need a cutover at least to convert the
data. one of the steps it to run CKMSTART. SAP will convert the data for ML, Purchase
orders, Production orders, Order history, historical tables, and other. it will be necessary
a maintenance in the master data after conversion that is part of the cutover. But this is
not a stop for ML implemantation. Meaning companies with large amount of data without
ML can also acitvate ML without risk of loosing data.
Q: Will this conversion impact all MM-active plants or only the selected
plants?/companies converting to the ML?
A: Only in the plants you select in ckmstart. the others no. You need to wait until the data
is converted to work again with the plant. By default when you set a plant live in ckmstart
SAP sets the materials that were S, to S2 that means not relevant for level multilevel (No
ML relevant). The post processing step is to change the materials from 2 to 3 so ML will
also record price differences for the materials.
Q: If we want to activate a ML for and new MM-setup, company and plant, how
much time does testing take?
A: If a plant is not already on SAP and they want to go to ML, then there is no conversion
needed, therefore you only need to test the ML functionality itself. Again this varies
depending on the company, but I would allow 1 - 2 weeks of testing.
Q: Do either of our speakers have experience for Oil and Gas clients running the
MM?
A: Yes we have worked with oil and gas material ledger. there are some specific
functionalities, such as Distribution of usage variances and another add-ons as well that
will require a little bit more time for the project, because it depends how you are using
oil and gas. But the ML works fine with oil and gas as well. The restriction for ML is for
retail companies, but also for this there are some workarounds.
Q: Can you clarify the comment about ML with Moving Average and Price
Determination "2" is the same as not using ML at all? We do this and do see a
difference - a separate ML document is generated the records "variances" for the
adjustment in the moving average.
A: Yes it is the same, you see the ML posting because SAP automatic calculate the new
moving average for the product. it is a posting in and out, to make the Moving average.
The separated ML document is because in the customizing it was defined as ML
document. But you can also define this document as price difference. The important part
is that Moving average without ml = moving average with ML. the advantage is to use the
reports for ML when ML is active.
Q&A questions answered by ERPfixers expert Fixers Rogerio Faleiros & Paul
Ovigele.
https://blogs.sap.com/2018/01/07/material-ledgers-actual-costing/
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Material Ledger/ Actual Costing is one of the complex tool provided by SAP to manage its inflows and
outflows of core manufacturing related materials in multiple currency and valuations. In this blog, I have tried
to explain this functionality in detail with example (mainly Actual Costing).
Basically Material Ledger/Actual Costing are the two separate functionalities which are inter-dependent and
are incorporated in the SAP Controlling module which are discussed below.
Actual Costing
Actual Costing is functionality provided by SAP to calculate actual prices i-e; PUP (periodic unit price) of
inventories/ valuated material including Raw Material (ROH), Semi- Finished Good (HALB) and Finished
Good (FERT). It includes all the actual prices for material in particular period.
Actual Costing Run (CKMLCP) is the month end activity, which is used to valuated the inventory in balance
sheet at actual price (PUP- Periodic Unit Price) by calculating and posting Production variance during the
month on the Material which was previously maintained at Standard Price (calculated from CK11N) in balance
sheet.
Standard costing and actual costing can run completely separate from each other without any conflicts. The
only decision to be made is, what price you use for material valuation. You can mark and release your cost
estimations from CK40N as standard price to be used during the period. After the period is over and you run
your CKMLCP you can decide in the closing entries if you want to revalue the inventory (of last month) by the
periodic unit price.
The figure below shows the process and entries for Production Variance without Material Ledger/ Actual
Costing,
The figure below shows the process and entries for Production Variance with Material Ledger/ Actual Costing,
If ML / Actual Costing is active the following Price determination setting can be done in
Material Master of material.
Moving Average price (V) Standard price (S) Standard price (S)
Material Ledger
Material Ledger is a tool used to manage your inventory in multiple currencies and/ or perform multiple
inventory valuation. It allows the client to manage its inventory in three currencies which is previously (when
Material Ledger is not activated) being manged in only one currency with legal valuation.
If multiple valuations are used ML valuates the materials in up to 3 If multiple valuations are not used ML just store the
valuation views with 2 currencies material prices/stock values in up to 3 currencies
For each valuation view we maintain separate Version in controlling through t-code: OKEV.
Example,
Version Version Description Plan Actual Valuation View WIP/RA Variance
0 Legal valuation . Legal valuation
With Legal Valuation, you are able to valuate your business processes similar to how you would do that in
the Company Code, using Company Code Currency. Hence your financial reporting will be similar in Profit
Center Accounting and FI.
In the Group View, you apply transfer pricing among Profit Centers at cost. Therefore, there are no intra-
company transfer profits. The only profits that arise will be with respect to non-group companies.
With the Profit Center View, you apply transfer prices amount Profit Centers with Internal Revenue and
Internal Costs. Therefore, rather than transfer the goods at Cost, the sender PC will “sell” the goods to the
receiver PC. This differs from the Legal view, where the group valuation is more like a intra-group transfer.
S4 HANA Simplifications for Actual Costing:
Previously in SAP ECC,
To Create a collective order, one of the SFG must have a special procurement key 81 in its MRP/ Costing view
of master data.
As, we are using External activity “PCKG” at operation 0020. So when create Production order of any quantity
the Purchase requisition for this activity type based on required quantity and standard price got created. Then
on the basis of the Purchase requisition purchase order is created and Invoice verification MIRO is done
against it.
Now the confirmation for SFG1 operation 0010 is performed. During confirmation the plan yield based on
production quantity plus BOM and activity from routing is suggested which is change by manually entering
the actual quantity and activity cost. It also suggests scrap of 2% maintained in MRP1 view of material master.
Figure below analyzes RM1 goods issue and SFG1 Production issue for Production order in Material price
report CKM3N for RM1 and SFG1.
Now the confirmation for SFG2 operation 0010 is performed. The pertaining accounting entries and moment
types are shown in figure below,
Below is the figure to analyze RM2 goods issue and SFG2 Production issue for Production order in Material
price report CKM3N for RM2 and SFG2.
Now, we do the final confirmation for FG1 for operations “0010” and “0020” as shown in figure below,
Material Price Analyses report CKM3 for FG1 is analyzed, as shown in the below figure,
Following are the additional reports to further analyze the FG1 Material activity, purchase price and
production variances.
Month-End Process for Production:
Now, we calculate actual activity Prices through KSII or entered it manually through KBK6. Then we TECO
the all three production order and run the settlement to calculate Production Variances for FG (FERT) and
SFGs (HALB).
Below the figure showing CKM3 report analysis for FG1, SFG1 and SFG2,
Order to Cash Cycle for FG:
Now we make the sales 100 quantity of FG1. First we maintain the sales price for condition type PR00 in
VK11 and then we execute the sales order cycle for the entry of sales order to billing where the accounting
invoice is generated in Finance.
After doing post good issue/ delivery where the accounting entry is generated for Cost of sales. In Material
Price analysis report CKM3 for FG, we are now able to see the impact of this sales as shown in below figure,
Note: If costing based CO-PA is activated, we can see the document generated for delivery and billing in
Profitability Analysis by using t-code KE24 only after billing.
Actual Costing Run (CKMLCP):
Pre-requisites:
The sequence in ML/Actual Costing should always be the following:
1) Create and mark cost estimate in period 1 for period 2 (T-Code: CK11N)
2) Do the period shift from period 1 to 2 (T-Code: MMPV)
3) Release the Standard cost estimate (T-Code: CK40N or CK24)
4) Do ML period end closing of period 1 (T-Code: CKMLCP)
With ML active, you may use CKMLCP to calculate the actual price and mark it as the further price (but only
for two periods later. Let’s say, if you do post closing for period 06 and get a periodic unit price, this price can
only be marked as future price in period 08 or later). This marked future price can be released via ck40n, ck24,
CKME.
If the company decides to go for periodic unit price every period. It is recommended to execute CKMLCP and
further processes till release of periodic unit price from period 6 to 7 with material price determination
maintain as 3 and S.
Company may decide whether or not to use the PUP (actual price) as future price. If it does not want so, use
the normal Product Cost Planning process from CK11N/ CK40N.
CKMLCP Execution:
CKMLCP is executed to calculate Period Unit Price (PUP), which basically represent average actual cost for
material or semi finished goods. Execution of CKMLCP includes the below steps:
Step 1: Selection
Execution of Selection steps identified, the list of materials for which the Periodic Unit Price calculation need
to be executed during CKMLCP. The selection step work on the below concept:
After executing the Selection step, the system will identifies all the materials for which Periodic Unit Price
should be calculated during the CKMLCP as in our case materials MAK2 RM1, MAK2 RM2 MAK2 SFG1,
MAK2 SFG2 & MAK2 FG1 are selected.. The materials selected during this run are based on following
criteria,
In this step the system describes the sequence in which the Periodic Unit Price for all the selected materials
needs to be calculated.
It determine the group of materials, the cost of which don`t depend on the cost of any other materials.
Generally these are externally procured materials from external vendor (not from internal organization transfer,
or purchase from some other plant of same company). Like in our case raw materials MAK2RM1 and
MAK2RM2 gets selected. These materials are considered for actual PUP calculation at single level price
determination.
All the other materials, manufacture in-house, sub-contracting, purchase from some other affiliates in the same
company are considered for multilevel price determination.
Single-level material price determination is the step in which the Periodic Unit Price (also called PUP, Actual
Price) is determined.
This step calculates actual material prices based on Costs of Procurement.
The term single-level always refers to an individual material and its procurement process (external
procurement and internal procurement like production or company transfer).
When using Actual costing, all materials are valuated with a preliminary price (standard price) that must
remain constant during a period.
Variances (price differences and exchange rate differences) arise during the period for this preliminary
valuation price.
At the end of the period, you can use the single-level price determination to assign the variances recorded in
the period for each material.
In our case the Price difference for RM1 & RM2 are calculated and production variance for SFG1, SFG2 &
FG1 are calculated.
The below figure shows the impact of single level price difference on the ending inventory of FG1.
1- Variance between the Standard price of raw materials with the Single level PUP calculated at -single level
price determination
2- Variance between Plan activity rate with Actual activity rate
3- Variance allocation performed through the actual flow of goods on actual quantity
4- Variance between inter-plant (under same company, may or may not be under the same co. codes) transfer
are also consider if any goods movement happened between these plants, otherwise not
5- All other variances having an impact on lower level materials actual cost are consider for calculating actual
PUP for higher level materials.
The screenshots below depicts the the impact of Multi-Level Price determination on the RM1 to SFG1
highlighted in blue circle.
The picture below shows the the effects of Multi level Price determination on SFG2 from RM2 consumption.
Finally the the variances in consumption of SFG1 & SFG2 for FG1 would be transfer to FG1 Receipt from
lower level Variances as shown in the figure below.
Step 5: Revaluation of consumption
In this step system do the revaluations of all the consumption based on the actual PUP calculated at single level
or multilevel price determination. The main purpose of this step is to bring the cost of consumption for Good
Finished to actual cost, so that the profit margins are not over or under stated.
The below image illustrates the impact of Consumption Revaluation on FG1 as the cost from non-allocated is
assigned to Revaluation of Consumption.
As in our scenario WIP is not calculated for Production Order so we skip this step.
At post closing step, system do the posting of all the variances calculated during single level or multilevel price
determination and do the revaluation of consumption and closing inventory, and passed the necessary entries.
After this the material master price control in the previous period will be changed permanent to V, from S. But
in the new period, it will still be S.
Below are Accounting entries for the analysis resulted as a result of Post Closing execution.
In above entries you see that here the activity Price variance is charge to cost center and FG Inventory directly
rather than to Cost center and Production Order. Here we don’t have to run t-code CON2 for Revaluation of
activity at actual Price.
Step 8: Mark material price
Material ledger provides the functionality of converting the current Periodic unit Price (PUP) as standard cost
of next month. This can be done via executing the Mark material price step.
When you mark price with CKMLCP, the future price in accounting view 1 is changed together with the “valid
from” date.
After executing this step, the PUP of current months gets updated as marked cost estimate for coming month.
For converting, the PUP of current month as standard cost of next month autoatically, we need to activate
Dynamic price release.
This Blog is aimed to give the concept and use of Material Ledger/ Actual Costing and what benefits an
organization gains from this functionality. Below are some references which are knowledge full to readers if
they want more insight of Actual Costing. Hope that this article is able to deliver what it is destined too. It is
requested from readers to please share their feedback. Your time and efforts would be highly appreciated.
References:
https://blogs.sap.com/2014/05/12/automation-of-actual-costing-run-ckmlcp-in-material-ledger/
https://archive.sap.com/discussions/thread/1772674
https://archive.sap.com/discussions/thread/3346981