SAP BLOG Material valuation with Material Ledger

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22 Ara 2017
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Material Ledger combines the advantages of both MVA and Std price

One of the Advantages of the Material Ledger is , it combines the advantages of both types of price controls

  1. S ( Standard price)
  2. V (Moving Average price)

In this blogpost you will learn how Material Ledger combines the advantages of both MVA and Std price

Let us first see the advantages and disadvantages of Price control V and S

S ( Standard price) V (Moving Average price)
Adv : Std price can be used as a bench mark price to analyse the variancesDisadv : As the MVA changes with every goods receipt and invoice receipt . it can not be used as a bench mark price . So variance analysis is not possible ,
Disadv : Std price don’t reflect the actual priceAdv : MVA reflects the actual price as it updates with every goods receipt and invoice receipt .

Let us see what are the price controls recommended for different types of materials with ML active and with out ML active . Let us have a look into the table

Price Control and Price determination

ML activeML not active
Moving Average price (V) Standard price (S)
Standard price (S)

Recommended for SFG FG

Price determination

2 Transaction-based

(MVA is used for valuation)

Price determination

3 Single/Multilevel

(PUP is used for Valuation in the closed period)

Recommended for FG SFG and also RM

Price determination

2 Transaction-based

(std price is used for Valuation. MVA is used for Info purpose)

Moving Average(V)

Recommended for RM

When Material ledger is not active MVA is recommended for RM and Std price is recommended for FG and SFGs (as shown in the 4th column)

When Material ledger is active Std price and Price determination 3 (ie Single/Multilevel Price determination ) is recommended for FGs , SFGs and RMs (as shown in the 2nd column)

It is interesting to see that when Material ledger is active it is recommended to set Std price even for RMs.

More interestingly system do not use Std Price for all periods even though we set std price in the material master.

In fact system uses Std price in the current period and MVA price in the closed periods. Let us have a look at the images .



Post Closing entries

Let us now no see how price control changes from Std to MVA at month end and back to Std price at the beginning of the next month . Have a look the following images and notice the posting dates . These two are the documents generated during ‘Post Closing ‘ flow step in CKMLCP .



From the posting dates and line items of the documents one can understand that 2nd document is the reversal of the first document .

Change of Price control

Finally we can conclude that during the single level and multi level price determination actual cost (PUP) is calculated . During ‘Post Closing’ the system changes the price control to ‘V’ and uses PUP as the new MVA price. Price differences are posted to inventory accounts(posting date will be the last day of the period ).

And creates one more document which is a reversal of the inventory posting (Posting date will be 1st day of the next period) and sets the price control back to ‘S’ . This is how Material ledger uses both Std price and MVA price but for different periods and combine the advantages .

Further advantage of Material ledger is that uniform average prices(of the period) are used to valuate all the consumptions in a period . This is possible with the functionality ‘ Revaluation of consumption ‘ .

Thanks for reading the blog

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