Standard vs Moving Average Price 1
By: Shailesh Singh | 29 Jan 2006 7:10 am Generally all raw materials (ROH), spare parts (ERSA), traded goods (HAWA) etc. are assigned as moving average price (MAP) because of the accounting practice of accurately valuating the inventory of such materials. These materials are subject to the purchase price fluctuations on a regular basis. Company generally generally use moving average on purchased materials with small cost fluctuations. It is most appropriate when the item is easily obtainable. The impact on margins are minimized which reduces the need for variance analysis. Furthermore, the administrative effort is low as there are no cost estimates to maintain. The cost reflects variances, which are closer to actual costs. The semi-finished goods (HALB) and finished products (FERT) are valuated with standard price because of the product costing angle. If these were to be MAP controlled, then finished/semi-finished product valuation would fluctuate due to data entry errors during backflushing of material and labour, production inefficiencies inefficiencies (higher cost) or efficiencies (lower cost). This is not a standard accounting and costing practice. Refer to OSS note 81682 - Pr.Contr.V for semi-finished and finished products. SAP recommends that standard price to be used for FERT and HALB. If actual price is required for valuation, make used of the functions of material ledger where a periodic actual price is created which is more realistic. e.g. how SAP calcualte the moving average price Goods Receipt for Purchase Order Balance on hand quantity + Goods Receipts quantity Balance on hand value + Goods Receipts value New Moving Average Price = Total Value / Total Quantity Invoice Receipt for Purchase Order Invoice price more than Purchase Order price additional value add to Balance on hand value then divided by Balance on hand quantity Invoice price less than Purchase Order price difference is deducted from the Balance on hand value (up to 0). The rest of the amount will becomes price variance. This will result in Balance on hand value is zero while there are Balance on hand quantity. If the Balance on hand value is enough to deduct, then the remaining value will be divided by Balance on hand quantity. When your Goods Issue price is constantly greater than your Goods Receipt price, it will result into zero value moving average price. OSS note 185961 - Moving Average Price Calculation. 88320 - Strong variances when creating moving average price. Never allow negative stocks for materials carried at the moving average.
MM/FI Difference for material stocks 321
By: rekha | 08 Apr 2011 11:50 am Symptom Transaction MB5L or report RM07MMFI shows differences between the material values in MM and the balances of the balance sheet accounts in FI. Reason and Prerequisites
The results of MB5L and RM07MMFI are affected by current postings. Therefore, you must either run the programs when no postings are taking place, or you must verify the results by making several runs. There are various reasons for verified differences: 1. You made direct FI postings to material balance sheet accounts. 2. In MM account determination, balance sheet accounts are used for operations other than 'BSX'. 3. Material documents exist that have no FI follow-on document, even though they should. 4. There are FI documents or other accounting documents but the source document in materials management is missing. Solution (Point 1) The amounts from these postings do not have any equivalent in the material valuation and therefore cause the MM/FI differences. You must cancel the corresponding postings in FI. You must then set the 'P ost automatically only' indicator (XINTB) in the account master record (fs00). (Point 2) In MM account determination, material stock accounts can only be assigned during operation 'BSX' because only these postings update the material valuation. Postings from other operations, such as price difference (PRD) or revaluations (UMB), lead to MM/FI differences. The balances resulting from this must be transferred to other accounts in FI. (Point 3) Your system contains active customer enhancements (user exits, customer exits, BAdIs) that cause an additional 'COMMIT WORK' statement to be processed. This is not allowed and results in inconsistencies. The incorrect documents can be corrected by SAP Remote Consulting (SAP employees should refer to internal Note 941721). (Point 4) This case is identical with case 3. However, usually it is not a 'COMMIT WORK' statement that is responsible but a 'ROLLBACK WORK' statement in the customer source code. In particular, method MB_DOCUMENT_BEFORE_UPDATE in BAdI MB_DOCUMENT_BADI creates a ROLLBACK without program termination and an incomplete document because the documents in accounting are created after the BADI. Therefore, a ROLLBACK must always be accompanied by a program termination. The MM document cannot be regenerated. The accounting documents must be deleted. This can be initiated by a message (which may be subject to charges) on c omponent FO-GL-GL-X. See also Note 636442. (General) If the cause of the problem is unclear, SAP support can run an analysis. In this case, first implement the additional reports from Note 32236 in your production system.
When GRN is prepared, the Standard price
Moving Average Price Vs Standard Price June 16th, 2009 by admin Leave a reply »
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Click a phrase to jump to the first occurrence, or return to the search results. SAP offers two methods of inventory valuation and product costing: standard cost and (weighted) moving average. The method to be used is identified on the material master level, thus different materials can use different methods within a plant. Although SAP does not restrict this choice, moving average is typically used only on purchased materials. The decision to use moving average for certain materials should reflect the approach used to analyze contribution margins, and variances in manufacturing and purchasing. Use of moving average on purchased materials may be appropriate where the item is an easily obtained commodity, with small fluctuations in cost. In such situations, the impact on margins is minimized, reducing the need for formal variance analysis. From a practical point of view, some of the key differences and considerations in how this would be reflected in the system are identified below. 1.
SAP has officially recommended not using moving average for semi-finished and finished materials. The
key point behind this recommendation is that the moving average may become distored due to the timing of cost postings and settlements, and the number of orders in progress for the same material.
See OSS note #81682
for more detail. 2.
There is no variance calculation for materials carried at moving average. Although this saves time during
month-end, by definition this eliminates any analysis of price variances on raw materials and consequently, on buyer performance. 3.
If (sub) assemblies are also carried at moving average, it is extremely difficult to identify the source of
fluctuating valuation since many materials in the BOM may contribute to it. Again, there is no variance calculation for analyzing manufacturing operations. Additionally, cost fluctuations will seriously impact margin analysis for items sold or transferred. 4.
In situations of rapid inventory turnover, use of moving average on (sub)assemblies may result in variance
postings due to inadequate stock coverage to absorb settlement adjustments. Attempting to settle more often / automatically may not be feasible if not all costs have been posted. 5.
Moving average can be set to zero and will not generate any warnings during transactions (i.e. no FI
postings). Standard cost also allows a zero standard cost (as of 3.0d), but generates at least a warning. 6.
Cost fluctuations at lower levels in the BOM will have a delayed impact on parent items, either in terms of
variance postings and/or adjustment of parent moving averages. For example, a lower level material which is adjusted through its own settlement, may be used at various points in the life cycle of higher-level orders; any cost under/overruns of the component would be reflected later on the higher level orders. 7.
The moving average for a material may be changed directly via t/c MR21, unlike the more formalized cost
roll-up procedure used in standard costing. Access to this transaction should be restricted. 8.
Changing a material from standard cost to moving average will overwrite the existing moving average with
the then-current standard; a report extract should be generated before any update for analysis and audit. 9.
Any changes to config on the price control for a material type impacts newly created materials only – they
are default settings and do not affect already created materials.
10.
In environments where some materials are carried at moving average and others at standard, there is a
subtle error possible. Even for materials being carried at moving average, the cost roll-up will update the standard price field with the calculated value. Since the material itself will be transacted at moving average, this would appear to be a statistical / memo entry only. However, the ‘as-delivered’ settings for valuation variant 001 (used for both cost roll-ups and goods receipt), are: a.
Planned price
b.
Standard cost
c.
Moving average cost
This means that in a cost roll-up, if the lower level item is being carried at moving average, has a costing view, and has been included in a cost roll-up, it will also have a standard price recorded. According to the standard valuation variant, this would mean the higher level material would see and use the standard cost before the moving average. This could result in a built-in variance.
Product Costing Master Data in SAP March 13th, 2009 by admin Leave a reply »
Product Costing Master Data in SAP Following are the important related master data to Product Cost Controlling Integration. a. Material Master view related to Product Costing b. Bill of Material c. Work Center d. Routing e. Production Order f. Product cost collector
Material Master View related to Product Costing Following views of material master are important for Product Costing. 1. Accounting Views 2. Costing Views 1.
Accounting Views :
Accounting View 1: a.
Valuation Class field determines which GL account will be debited/ credited.
b.
Price Control : If material master is created for raw material category, price control should be selected as V
which determines valuation of the raw material will be done on Moving Average Price. If material master is created for SFG or FG, price control should be selected as S which determines valuation of the SFG or FG will be done on Standard Price. Accounting View 2 :
a. Tax Price 1 to 3 : Valuation of inventory for taxation. b. Commercial Price 1 to 3 : Valuation of inventory for commercials. 2. Costing Views : Costing View 1: a. Overhead Group : Key which groups materials to which the same overhead is applied. While valuing SFG or FG through product cost sheet overhead group key determines which overhead rate is to be applied. b. Variance Key : Key that controls variance calculation. Costing View 2 : a.
Future Planned Price : Updated when current cost estimate is marked.
b.
Current Price : Updated when current cost estimate is released. Inventory of FG & SFG is valued at this
price. c.
Previous Price : When current cost estimate is released, the previous current price at which inventory was
valued will be updated in this field. d.
Planned Prices 1 to 3 : To capture other type of cost estimates prices which can be used for simulation
purpose. Bill of Material (BOM) Bill of Material is the list of standard input material & their quantity required to produce specified units of the given output material. While costing any semi finished / finished goods, the input material required for costing is picked up from BOM of the output material. Work Center A machine or a group of machines on which operation activities are performed to convert input materials to finished goods. Cost center and activity type are maintained in the respective work center for costing. Routing Routing gives sequence of operations & quantum of activities performed in respective work center to produce given output of specified material. While computing standard conversion costs, standard operations performed in a process, along with their standard timings, are given by routing. Production Order and Product Cost Collector Production Order is a cost object through which actual quantity to be produced and actual cost of production is determined. Product Cost Collector is a cost object used in repetitive manufacturing to determine actual quantity and cost of production for a period. Following are the important costing fields in Production order and Product Cost Collector under the control data screen. a. Costing variant for Planned/Actual costs This field specifies which costing variant used to determine the planned/actual costs. Costing variant contains all control parameters for costing, including parameters that control how cost estimates are executed and the material prices or activity prices that are used to valuate the costing items. It combines all the parameters for evaluating materials, internal activities and external activities in preliminary and actual costing. b. Costing Sheet Overhead Cost Sheet is used to calculate production overhead.
c. Overhead Key Overhead rate specified in overhead cost sheet can be determined for specific material or production order through overhead group or key. d. Result Analysis Key RA Key determines WIP value of Production Order. f. Variance Key It is used to calculate variance between standard cost and actual production cost after production order confirmation or periodically for Product Cost Collector.
Price Control V or S in material type When is it useful to use the price control V or S in Material Master ? Do I have to follow the SAP standard setting in the material type for the following material types: - ROH(Raw materials) -> moving average price - HALB(Semifinished products) -> standard price - FERT(Finished products) -> standard price In which case and why is useful to change these standard setting in material type? What is difference between standard price and moving average price? When and how to use it? Standard price are used for products that do not fluctuated frequently. It is usually used for finished or semi finished products. Moving average price are used mainly for raw materials that are purchased externally. The advantage of using moving average price for your raw materials is that your inventory costs will always reflect the current market cost. SAP strongly recommends that you do not select price control V for semi-finished products and finished products, because doing so will very easily cause the calculation of unrealistic valuation prices. SAP recommends: Price control V for raw materials and trading goods; price control S for semi-finished products and products. If you nevertheless select price control V, take care in the following situations:
1. Unrealistic prices occur if materials are produced and also retire during one period (that is, the inventory at the end of the period is smaller than the total of aquisitions from production orders) and if, in addition, several production orders belonging to a material were finished in this period, and the production order settlement calculates variances at the end of the period. Every single production order carries out an inventory coverage check and may therefore cause the moving average price to be changed. However, the individual production orders do not check whether the inventory available at the end of the period has already been debited by another production order. Example: on 20 workdays in the period, 1 piece of material xyz was produced for each day and delivered to the warehouse at a price of USD 1000. At the end of the period there is 1 piece at the warehouse. Since an activity price of a participating cost center was higher than planned , every single production order calculates cost of goods manufactured of USD 1100 during the settlement. Every single one carries out a inventory coverage check and finds out that the variance can be posted completely to the inventory. That is, the ending inventory of one piece is debited with USD 20 x 100 and it consequently receives a price of USD 3000.
1. A settlement is carried out although not all costs have yet been posted to the order. This can even result in a price of 0 for the delivered product. 2. No period check of the costs is carried out on the order, that is, costs from previous periods may be settled. 3. Settling orders is already possible in the 'Delivery completed' status. Solution: Standard price for products together with possible manual price changes. If you are required to valuate semi-finished and finished products with actual prices that correspond to the costs of the actual production, SAP recommends you use the function of the material ledger for this. Here, a periodic actual price is created that is calculated on a much more reliable basis than the moving average price. A so-called price limiter quantity is used which makes sure that in the above example price differences are proportionally taken into account (95% of the total price differences) when valuating the 19 pieces withdrawn from material xyz which results in a periodic actual price of 1100 USD. In addition, it is possible as of Release 4.5 to even take into account the variances of the actual prices of the raw materials in the valuation of the semi-finished and finished products that are manufactured from it. If we select std price for any type of material or mav and then make po, it will pick from material master or what?
The Purchase Info Record have the FIRST priority. When no po info record is found, the Purchase Order will pick the user LAST enter price. The PO module do not pick up any price from material master.
