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Material price determination determines how the valuation of a material occurs after each business transaction. When SAP Material Ledger is active, this field should be set in the Accounting 1 view with an appropriate combination of price control and material price determination. When SAP Material Ledger is active for a valuation area, the additional fields which become available in the Accounting 1 view are shown in Figure 1.
Figure 1 Material Price Determination Field
Let's discuss each of the field settings in detail.
(2) Transaction-based
With this option, you can choose your inventory price control as V (moving average) or S (standard price). With S, the moving average price is calculated for information only.
(3) Single-/Multilevel
With this option the price control must be S. A moving average or Period Unit Price (PUP) is calculated at month end.
Single-/Multilevel price determination allows you to calculate single and multi-level price differences and carry them over through a multiple level manufactured production structure.
Allowed price controls and price determinations for Actual Costing are shown in Table 1.
Table 1: Price Control and Material Price Determination Combination
The Accounting 1 view contains Valuation Data for a material as shown in Figure 2.
Figure 2 Accounting 1 View Valuation Data
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Rosana Fonseca, an independent SAP consultant since 2000, is certified in SAP FICO with extensive experience in SAP global projects. Rosana is originally from Brazil, a Canadian citizen in Toronto, and is the author of Practical Guide to SAP Material Ledger.
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A bill of material (BOM) is a structured hierarchy of components necessary to build an assembly. BOMs together with purchasing info records allow cost estimates to calculate material costs of assemblies.
A BOM application is a costing variant component for automatic determination of alternative BOMs.
A BOM group is a collection of BOMs for a product or number of similar products.
BOM Item Component Quantity
The quantity of a BOM item that is entered in relation to the base quantity of the product.
Six indicators, such as costing relevancy, are contained in the Status/Long Text tab of a BOM item.
This controls the current processing status of the BOM. For example, a BOM may have a default status of not active when initially created, which then may be changed to active when the BOM is available for use in material requirements planning (MRP) and released for planned orders.
This determines a section of your company, such as production, engineering, or costing. You define which item statuses can be used in each BOM usage; for example, all items in BOMs with a certain usage may be relevant to production.
Bulk materials are not relevant for costing in a cost estimate and are expensed
directly to a cost center. The Bulk Material checkbox is maintained in the MRP 2 view and the BOM item. If a material is always used as a bulk material, set the indicator in the material master. If a material is only used as a bulk material in individual cases, set the indicator in the BOM item, which has a higher priority.
A calculation base is a group of cost elements to which overhead is applied. The calculation base is a component of a costing sheet, which summarizes the rules for allocating overhead.
A chart of accounts is a group of general ledger accounts assigned to each company code. This chart of accounts is the operative chart of accounts used in both financial and cost accounting. All companies within the one controlling area must have the same operative chart of accounts. Other charts of accounts include the country-specific chart of accounts required by individual country legal requirements and the group chart of accounts required by consolidation reporting.
A company code is the smallest organizational unit of financial accounting for
which a complete self-contained chart of accounts can be drawn up for external reporting.
Component scrap is the percentage of component quantity that does not meet required quality standards before being inserted in the production process. The plan quantity of components is increased. Component scrap is an input scrap because it is detected before use in the production process. You can plan component scrap in the MRP 4 view and the Basic Data tab of the BOM item. An entry in the BOM item field takes priority over an entry in the material master MRP 4 view.
Conditions are stipulations agreed upon with vendors, such as prices, discounts, surcharges, freight, duty, and insurance. You maintain purchasing conditions in quotations, purchasing info records, outline agreements, and orders.
The condition technique is used to determine the purchase price by consideration of all the relevant pricing elements. A feature of the technique is the formulation of rules and requirements.
A condition type is a key that identifies a condition. The condition type indicates, for example, whether the system applies a price, a discount, a surcharge, or other pricing, such as freight costs and sales taxes.
A confirmation documents the processing status of orders, operations, and individual capacities. You specify the operation yield, scrap and rework quantity, the activity quantity, work center, and who performed the operation.
Consignment occurs when a vendor maintains a stock of materials at a customer site. The vendor retains ownership of the materials until they are withdrawn from the consignment stores.
A cost center is master data that identifies where the cost occurred. A responsible person assigned to the cost center analyzes and explains cost center variances at period end.
A cost component identifies costs of similar types, such as material, labor, and overhead costs by grouping together cost elements in the cost component structure.
Cost component groups allow you to display cost components in standard reports. In the simplest implementation, you create a cost component group for each cost component and assign each group to a corresponding cost component. You assign cost component groups as columns in cost estimate list reports and costed multilevel BOMs.
The cost component split is the combination of cost components that makes up the total cost of a material. For example, if you need to view three cost components (material, labor, and overhead) for your reporting requirements, the combination of these three cost components represents the cost component split.
You define which cost components make up a cost component split by assigning them to a cost component structure. Within the cost component structure, you assign cost elements and origin groups to cost components.
Each cost component is assigned to a cost component view. When you display a cost estimate, you can choose a cost component view, which filters the cost components displayed in the cost estimate.
Cost elements are included as part of a general ledger account. Primary cost elements identify external costs, while secondary cost elements identify costs allocated within controlling, such as activity allocations from cost centers to manufacturing orders.
A cost estimate calculates the plan cost to manufacture a product or purchase a component. It determines material costs by multiplying BOM quantities by the standard price, labor costs by multiplying operation standard quantities by plan activity price, and overhead by costing sheet configuration.
A costed multilevel BOM is a hierarchical overview of the values of all items of a costed material according to the material’s costed quantity structure (BOM and routing). You display a costed multilevel BOM on the left side of a cost estimate screen. You can also view a costed multilevel BOM separately with Transaction CK86_99.
As of SAP S/4HANA release 2022, event-based processing is available, where goods movements and confirmations represent events that trigger the calculation of overhead according to the costing sheet. Then, depending on the status of the order, this triggers either the posting of a journal entry for the work in process (WIP) or the cancellation of any existing WIP and the calculation of production variances.
A goods issue is the movement (removal) of goods or materials from inventory to manufacturing or to a customer. When goods are issued, it reduces the number of stock in the warehouse.
GR/IR is the SAP process to execute the three-way match- purchase order, Material Receipt, as well as vendor invoice. You use a clearing account to record the offset of the Goods Receipt (GR) and Invoice Receipt (IR) postings. As soon as completely processed, the postings in the cleaning account balance.
An internal order monitors costs and revenue of an organization for short- to-medium-term jobs. You can carry out planning at a cost element and detailed level, and budgeting at an overall level with availability control.
Long-term planning allows you to enter medium- to longer-term production plans, and simulate future production requirements with long-term MRP. You can determine future purchasing requirements for vendor RFQs, update purchasing info records, and transfer planned activity requirements to cost center accounting.
Margin Analysis is the refined version of Account-based COPA. The Universal Journal combines financial and managerial accounting and directly records all dimensions, including custom fields. Margin Analysis provides consistent financial information without any reconciliation needs along with a financial audit trail. All innovations developed for the Universal Journal are immediately available within Margin Analysis. A consistent approach ensures common usage of ledgers, currencies, valuations, predictions, and simulations, as well as their availability in planning and reporting.
Master data is information that stays relatively constant over long periods of time. For example, purchasing info records contain vendor information such as a business name, which usually doesn’t change.
A material master contains all the information required to manage a material. Information is stored in views, and each view corresponds to a department or area of business responsibility. Views conveniently group information together for users in different departments, for example, sales and purchasing.
A process order is a manufacturing order that is used in process industries. A master recipe and materials list are copied from master data to the order. A process order contains operations that are divided into phases. A phase is a self-contained work-step that defines the detail of one part of the production process using a primary resource.
In process manufacturing, only phases are costed not operations. A phase is assigned to a subordinate operation and contains standard values for activities, which are used to determine dates, capacity requirements, and costs.
A procurement alternative represents one of a number of different ways of procuring a material. You can control the level of detail in which the procurement alternatives are represented through the controlling level. Depending on the processing category, there are single-level and multilevel procurement alternatives. For example, a purchase order is single-level procurement, while production is multilevel procurement.
A production order is used for discrete manufacturing. A BOM and routing are copied from master data to the order. A sequence of operations is supplied by the routing, which describes how to carry out work-steps.
An operation can refer to a work center at which it is to be performed. An operation contains planned activities required to carry out the operation. Costs are based on the material components and activity price multiplied by a standard value.
Product drilldown reports allow you to slice and dice data based on characteristics such as product group, material, plant, cost component, and period. Product drilldown reports are based on predefined summarization levels and are relatively simple to setup and run.
Production variance is a type of variance calculation based on the difference between net actual costs debited to the order and target costs based on the preliminary cost estimate and quantity delivered to inventory. You calculate production variance with target cost version 1. Production variances are for information only and are not relevant for settlement.
A production version determines which alternative BOM is used together with which task list/master recipe to produce a material or create a master production schedule. For one material, you can have several production versions for various validity periods and lot-size ranges.
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