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Actual Costing with SAP Material Ledger


Actual Costing with SAP Material Ledger

By John Jordan

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SAP Material Ledger has two main functions:

  • Carry inventory in multiple currencies and valuations

  • Actual Costing


In this blog we'll discuss Actual Costing in detail:

Actual costing generates a material ledger document for all goods movements at standard price (preliminary valuation). At period-end, the actual price is calculated for each material based on the actual costs of the period. The actual price is called the Periodic Unit Price (PUP) and can be used for the following two functions at period-end:

1. Revaluate inventory

The material stock account is debited with the proportional price differences, and the price differences account is credited with the same amount. You use the actual price as the standard price for the next period.

2. Do not revaluate inventory

Price differences are posted to an accrual account. The amount that you would have posted to the material stock account is posted to another price difference account.

 Many companies do not revauate inventory initialy before they revaluate inventory.

You decide to revalue inventory or not according to which financial accounts are posted to during automatic account determination with configuration Transaction OBYC. If you want the system to calculate a PUP for your materials based on the actual costs incurred in a period, you activate actual costing in addition to activating the material ledger.

You activate actual costing with IMG menu path:

Controlling • Product Cost Controlling • Actual Costing / Material Ledger • Actual Costing • Activate Actual Costing

The screen shown in Figure 1 is displayed.

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 Figure 1: Activate Actual Costing

In this step, you activate actual costing for materials and activity consumption update in the quantity structure. Here's an explanation of each of the fields:

Act. Costing (3rd column Activate Actual Costing): If you work with multilevel price determination in the Actual Costing component, you must select this checkbox so that the actual quantity structure is updated.

ActAct (4th column Update of Activity Consumption in the Quantity Structure): Actual costing determines what portion of the variance you debit to the next-highest level using material consumption. The actual Bill of Material (BOM) enables variances to be rolled up over multiple production levels all the way to the finished product.

Left-click then right-click the field and select Possible Entries to display the list at the right in Figure 1.

The possible entries are explained as follows:

0. No activity update: Update is not active

1. Activity update not relevant to price determination: Update is active but not relevant to price determination. Consumption is updated in the quantity structure but not taken into account upon price determination.

2. Activity update relevant to price determination: Variances between the activity prices/process prices posted during the period and the actual price at the end of the period are adjusted subsequently. In addition, you must set multilevel price determination 3 in the Accounting 1 view.

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You must use standard price control for all materials that you use in Actual Costing.


After you activate actual costing you’ll need to carry out an actual costing run each period-end with transaction CKMLCP. The actual costing run screen as shown in Figure 3 is similar to the standard cost estimate costing run screen.


First, assign plants to the actual costing run in the Plant Assignment tab as shown in Figure 2.


Figure 2 Assign Plants CKMLCP


Then follow the rows listed in the first Flow Step column in Figure 3.


Figure 3 Actual Costing Cockpit CKMLCP



When setting up SAP Actual Costing please Contact Us to discuss and evaluate all your options with our expert and experienced SAP consultants.

Many large global companies choose ERPCorp for expert and valued advice on their choice of the three possible SAP Material Ledger currencies and valuation approaches.


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Accrual Accounting

Accrual Accounting is a financial accounting method that allows a company to record revenue before receiving payment for goods or services sold and record expenses as they are incurred.

In other words, the revenue earned and expenses incurred are entered into the company's journal regardless of when money exchanges hands. Accrual accounting is usually compared to cash basis of accounting, which records revenue when the goods and services are actually paid for.

Accrual Order

An accrual order enables you to monitor period-related accrual calculation between expenses posted in Financial Accounting and Controlling.

Actual Costing

Actual costing determines what portion of the variance is debited to the next-highest level using material consumption. All purchasing and manufacturing difference postings are allocated upward through the BOM to assemblies and finished goods. Variances can be rolled up over multiple production levels to the finished product.

 Bill of Material

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.

Valuation Type

You use valuation types in the split valuation process, which enables the same material in a plant to have different valuations based on criteria such as batch. You assign valuation types to each valuation category, which specify the individual characteristics that exist for that valuation category. For example, you can valuate stocks of a material produced in-house separately from stocks of the same material purchased externally from vendors. You then select procurement type as the valuation category and internal and external as the valuation types.

Valuation Variant

The valuation variant is a costing variant component that allows different search strategies for materials, activity types, subcontracting, and external processing. For example, the search strategy for purchased and raw materials typically searches first for a price from the purchasing info record.

Valuation Variant for Scrap and WIP

This valuation variant allows a choice of cost estimates to valuate scrap and WIP in a WIP at target scenario. If the structure of a routing is changed after a costing run, WIP can still be valued with the valuation variant for scrap and WIP resulting in a more accurate WIP valuation.

Valuation View

In the context of multiple valuation and transfer prices, you can define the following views:
– Legal valuation view
– Group valuation view
– Profit center valuation view

Work Center

Operations are carried out at work centers representing; for example, machines, production lines, or employees. Work center master data contains a mandatory cost center field. A work center can only be linked to one cost center, while a cost center can be linked to many work centers.

Work in Process

Work in process (WIP) represents production costs of incomplete assemblies. For balance sheet accounts to accurately reflect company assets at period end, WIP costs are moved temporarily to WIP balance sheet and profit and loss accounts. WIP is canceled during period-end processing following delivery of assemblies to inventory.


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