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SAP S/4 HANA Material Ledger

SAP Actual Costing / Material Ledger

Configuring SAP Material Ledger involves several steps to ensure accurate and detailed material valuation. Below is a step-by-step guide on how to configure SAP Material Ledger. Please note that the exact steps and transaction codes may vary depending on your SAP version and configuration. Always refer to the official SAP documentation for your specific SAP version. Following the best practices implementation is always the best solution to leveraging the full capabilities of SAP Material Ledger.

ML
Seq
Transaction
Name
Module
Reference
SAP Path
001
OX14
Valuation Level
MM
Define Valuation Level
IMG -> Enterprise Structure -> Definition -> Logistics - General -> Define Valuation Level
002
OMX2
Assign Currency Types and Define Material Ledger Types
PC-ML
Assign Currency Types and Define Material Ledger Types
IMG -> Controlling -> Product Cost Controlling -> Actual Costing /Material Ledger -> Assign Currency Types and Define Material Ledger Types
003
OMX3
Assign Material Ledger Types to Valuation Area
PC-ML
Assign Material Ledger Types to Valuation Area
IMG -> Controlling -> Product Cost Controlling -> Actual Costing /Material Ledger -> Assign Material Ledger Types to Valuation Area
004
CKM9
Check Material Ledger Settings (Display of ML-Relevant Customizing Settings)
PC-ML
Activate Material Ledger for Valuation Area
IMG -> Controlling -> Product Cost Controlling -> Actual Costing /Material Ledger -> Activate Material Ledger for Valuation Areas
005
OMX1
Activation of Material Ledger
PC-ML
Activate Material Ledger for Valuation Area
IMG -> Controlling -> Product Cost Controlling -> Actual Costing /Material Ledger -> Activate Material Ledger for Valuation Areas
006
S_ALR_87008137
Maintain Number Ranges for Material Ledger Documents
PC-ML
Maintain Number Ranges for Material Ledger Documents
IMG -> Controlling -> Product Cost Controlling -> Actual Costing /Material Ledger -> Maintain Number Ranges for Material Ledger Documents
007
OMX4
Number range: Material ledger document
PC-ML
Maintain Number Ranges for Material Ledger Documents
IMG -> Controlling -> Product Cost Controlling -> Actual Costing /Material Ledger -> Maintain Number Ranges for Material Ledger Documents
008
OMX5
Configure Dynamic Price Changes
PC-ML
Configure Dynamic Price Changes
IMG -> Controlling -> Product Cost Controlling -> Actual Costing /Material Ledger -> Configure Dynamic Price Changes
009
V_CKMLKONT
No text found for transaction (Assign Acc. Assignment Reason to Acct Modification Const)
PC-ML
Reasons for Price Changes
IMG -> Controlling -> Product Cost Controlling -> Actual Costing /Material Ledger -> Reasons for Price Changes
010
OMX_UMB_ACCOUNTS
Display Accounts For Account Key UMB
PC-ML
Reasons for Price Changes
IMG -> Controlling -> Product Cost Controlling -> Actual Costing /Material Ledger -> Reasons for Price Changes
011
OPR4_ACT
Define User-Defined Message Types
PC-ML
Define User-Defined Message Types
IMG -> Controlling -> Product Cost Controlling -> Actual Costing /Material Ledger -> Define User-Defined Message Types
012
SM30 (V_CKMLMV010_T)
Define Movement Type Groups of Material Ledger
PC-ML
Define Movement Type Groups of Material Ledger
IMG -> Controlling -> Product Cost Controlling -> Actual Costing /Material Ledger -> Material Update -> Define Movement Type Groups of Material Ledger
013
SM30 (V_156Q_ML)
Assign Movement Type Groups of Material Ledger
PC-ML
Assign Movement Type Groups of Material Ledger
IMG -> Controlling -> Product Cost Controlling -> Actual Costing /Material Ledger -> Material Update -> Assign Movement Type Groups of Material Ledger
014
OMX9
Define Material Update Structure
PC-ML
Define Material Update Structure
IMG -> Controlling -> Product Cost Controlling -> Actual Costing /Material Ledger -> Material Update -> Define Material Update Structure
015
OMX8
Assign Material Update Structure to a Valuation Area
PC-ML
Assign Material Update Structure to a Valuation Area
IMG -> Controlling -> Product Cost Controlling -> Actual Costing /Material Ledger -> Material Update -> Assign Material Update Structure to a Valuation Area
016
CKM9
Verify Settings for Actual Costing (Display of ML-Relevant Customizing Settings)
PC-ML
Activate Actual Costing
IMG -> Controlling -> Product Cost Controlling -> Actual Costing /Material Ledger -> Actual Costing -> Activate Actual Costing
017
SM30 (VV_T001W_MV_1)
Activate actual costing
PC-ML
Activate Actual Costing
IMG -> Controlling -> Product Cost Controlling -> Actual Costing /Material Ledger -> Actual Costing -> Activate Actual Costing
018
OMXW
Activate WIP at Actual Costs
PC-ML
Activate WIP at Actual Costs
IMG -> Controlling -> Product Cost Controlling -> Actual Costing /Material Ledger -> Actual Costing ->Activate WIP at Actual Costs
019
SM30 (V_T001K_CCS)
Activate Actual Cost Component Split
PC-ML
Activate Actual Cost Component Split
IMG -> Controlling -> Product Cost Controlling -> Actual Costing /Material Ledger -> Actual Costing -> Activate Actual Cost Component Split

SPRO IMG Customizing Tree

These are the basic customizing transaction used to setup Material Ledger:

  1. Assign Currency Types and Define Material Ledger Types

  2. Assign Material Ledger Types to Valuation Area

  3. Activate Material Ledger for Valuation Areas

  4. Maintain Number Ranges to Material Ledger Documents

  5. Configure Dynamic Price Changes

  6. Reasons for Price Changes

  7. Define User-Defined Massage Types

  8. Define Movement Types Groups of Material Ledger

  9. Assign Movement Types Groups of Material Ledger

  10. Activate Actual Costing

  11. Activate Actual Cost Component Split

  12. Activate WIP at Actual Costs

SAP Material Ledger IMG

1. Assign Currency Types and Define Material Ledger Types

Material Ledger Types

Automatic getting CT from:

  • Currency Type from FI

  • Currency Type from CO 

 

You don't need to enter the currency type manually

Manual:

You need to enter the desired currency types manually

SAP Material Ledger OMX2

2. Assign Material Ledger Types to Valuation Area

The Material Ledger Type that was created in the step above needs to be assigned Valuation Area.

Valuation Area | Organizational level at which the material ledger is valuated. It can be one of the following:

  • Plant

  • All plants belonging to a company code, in which case the valuation area is the company code.

SAP ML OMX3

2.1. Valuation Level

You define the valuation level by specifying the level at which material stocks are valuated. You can valuate material stocks at the following levels:

 

  • Plant Level

    • Valuation must be at this level in the following cases

      • If you want to use the application component Production Planning (PP) or Costing

      • If your system is a SAP Retail system 

  • Company Code Level

Valuation level choice affects the following:

  • Maintenance of material master records

  • G/L accounts in which material stocks are managed

  • G/L accounts to which transactions are posted in Materials Management

Important: Once set, it is not possible to switch the valuation level from plant to company code, or vice versa. If absolutely necessary to subsequently change the valuation level, contact a SAP consultant because a data conversion is required.

Standard Price versus Moving Average Price

 

Material Valuation

How materials are valuated in the SAP system essentially depends on the price control that was set for the material in the material master. You can choose between a valuation at the standard price (S price) or at the moving average price (V price).

When using the Material Ledger, you have the possibility of combining the advantages of standard price control and moving average price control.

With moving average price control, a new material price is calculated after every goods receipt, invoice receipt, and/or order settlement. This material price is an average value calculated from the total inventory value and the total quantity of the material in stock.

With standard price control, goods movements are valuated with a price that remains constant for at least one period. The standard price that is assigned to a material is usually the result of a standard cost estimate.

 

The main difference between the two valuation procedures is that the moving average price represents a current delivered price while the standard price is based on planned values and not actual values. Differences between the planned price and the actual prices are not assigned to the material stock in Financial Accounting, but rather are assigned to a price difference account. When using the moving average price, however, the material stock value in Financial Accounting can reflect the prices actually incurred. However, the moving average price has its disadvantages too.

Actual Costing

Use the component Actual Costing/Material Ledger to ensure a method of cost management that uses the most current data to calculate your actual material costs. You can use this component to calculate an average price at the end of the period using the actual costs incurred in that period. You can then use this average price to valuate the material stock in the period in question. The standard price is used for preliminary material valuation in the Actual Costing/Material Ledger component.

 

In the following text, problems that could result from valuating materials with the moving average price are illustrated in conjunction with a comparison of advantages and disadvantages of both methods of price control. You can avoid the problems that arise when using the standard price for material valuation by using the component Actual Costing/Material Ledger . In addition, there will be some recommendations from SAP as to which price control to use.

Standard Price (S)

Advantages

  • When using the standard price, all goods movements of a material are valuated with the same price over at least one period. Therefore, the standard price ensures consistent cost management of the production process and makes variances within production transparent. A periodic price (standard price) is especially useful when working with cost management by period.

  • The standard price can also be used as a benchmark by which you can measure different methods of production, or compare the contribution margins of a material in different market segments in Profitability Analysis.

Disadvantages

  • Because the standard price is held constant for an entire period, it does not reflect the actual costs incurred during the period. This can lead to inexact valuation prices for materials whose procurement prices change a great deal over a period, or whose method of production changes within a period.

  • This problem increases in multilevel production with each new production step. This means that the costs for the finished product may not reflect the most recent data.

  • The material stock value does not reflect the current procurement costs, as variances from the standard price are collected in a price difference account in Financial Accounting and do not lead to a correction of the material stock account. The variances collected in the price difference account can no longer be assigned to the individual material.

  • If you use split valuation for materials, please note that you can only release the material price at the header level of a material (not at the level of the valuation type) when calculating a material price in Product Cost Planning.

Moving Average Price (V)

Advantages

  • The advantage of using the moving average price is that variances are updated in the material price and the material stock value. Because the material price reflects the average procurement cost of a material, material issues could, in principle, be valuated with the current price.

  • Only in special cases are variances allocated to a price difference account in Financial Accounting rather than to the material stock.

  • The advantages of the moving average price are seen only if: you are looking at the material valuation data at the lowest production level; all variances occur immediately; the material price is not distorted by the sequence of postings by the system.

Disadvantages

  • The main disadvantage of using the moving average price is that the price used to valuate a material consumption is almost completely dependent on the time at which the goods issue is posted in the system. If, for example, an invoice receipt is posted in the system after a goods issue was entered, that invoice value is not reflected in the value of the material issued. The material is therefore not valuated with its actual procurement cost.

  • The moving average price also does little to guarantee consistent cost management of your production process. The effect of changes in the production process, for example, are not recognizable in the finished product, and comparing results from different areas in Profitability Analysis is not really meaningful due to lack of a benchmark.

  • The fact that the moving average price is not dependent on the period can also lead to incorrect material valuation, as goods movements that are posted to a previous period are not valuated with the price from that period, but rather with the current moving average price. Another problem with the moving average price is that any mistake entering data can cause immediate and unwanted changes in the material price. Any goods issues posted following this error will be valuated immediately with this incorrect material price.

  • In particular, the moving average price can lead to unrealistic material prices in cases of multi-level production or when there are variances that do not appear immediately. Such unrealistic prices occur, for example, when, in the context of stock coverage, a subsequent adjustment to the material stock occurs using an incorrect base quantity.

Material Ledger

When using the application component Material Ledger, you only use the standard price as a preliminary valuation price in the current period. At the end of the period, you can use this component to calculate an average price for the material using the actual costs incurred in that period. You can then use this average price to valuate the material stock in the period in question.

Hint: If you use Material Ledger, you should also use standard price control of raw materials and trading goods to ensure consistent cost management of your production process. Only in this way are variances completely transparent within production.

In Summary

The problems described above show that the moving average price, despite its advantages can lead to problems. In particular, the moving average price can cause unrealistic valuations of material inventory when materials are produced in-house or when variances do not appear immediately.

 

On the other hand, the standard price does not take any actual procurement costs into account, which can be a problem, for example, with externally procured materials with highly variable prices.

Recommendation

  • Moving Average Price: It should be used only in Trading Goods, but not in Raw Materials.

  • Standard Price:  It must be used for Semi-Finished, Finished Goods and Raw Materials.

Price Control
Price S
Price V

References: SAP (www.sap.com); SAP Support (support.sap.com); SAP Help (help.sap.com); SAP Blog (blogs.sap.com)

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