MATERIAL LEDGER SRINIVAS

MATERIAL LEDGER
Configuration
Srinivas

2019-2020
MATERIAL LEDGER SRINIVAS

MATERIAL LEDGER :-
 Material ledger is an SAP sub ledger that collects data from the transaction data
for material movement in multiple currencies or multiple different valuation
approaches. This forms the basis for actual costing.

 Moving average price is good for Companies that mainly do trading

Without Production processes
 Standard price is suitable for Companies with fixed product structures
and raw materials with modestly fluctuating prices.

In any case both Moving average price or Standard price may fail in an
organization with big fluctuations in raw material price and/or varying
production structures. Where neither of them can be used, there is
also the option of using Actual costing/Material ledger as an
alternative.

Note:-
If the material ledger is not used , SAP gives a clear recommendation:
MAP should be used only for Raw materials , not for Semi finished or
finished Materials.

 Material ledger is an auxiliary ledger that has three main objectives:

1. Carry material price in Multiple currencies.
2. Carry material price in multiple valuations.
3. Carry all material movement and variances (goods receipt , invoices
receipts, goods issues, etc.,) and use this data to calculate a periodical
actual cost.
 Without material ledger the system is valuated with only one currency: company
code currency. With material ledger the SAP system will carry inventory values in
two additional currencies or valuations.
MATERIAL LEDGER SRINIVAS
1.1.Multiple currencies:-
Normally we will maintain company code currency and controlling area currency ,
for those two currencies Cost estimate is transferred directly . If Material ledger is added with
third currency it is translated from company code currency based on different rates for different
scenarios.

1. Standard product cost:

The amount in the third currency translated using the amount in the company
code currency and the exchange rate at the time of the making process.
2. Manufacturing order settlement:
The amount in the third currency is translated from the company code currency
using the average rate.
3. Invoice receipt:

The system translates the amount into the currencies managed in the Material
ledger at the current exchange rate.

1.2. Multiple Valuations:-

SAP system supports three types of valuations to represent the three primary views of
goods movement within a corporate group

 Legal view
 Group/Corporate view
 Profit center view

These three different views are called valuation views. In sap each valuation view always
uses its own currency types.

1) Legal View:
This is a mandatory view, it represents the sale value/price of goods/services
transferred between legally independent member companies in the corporate
group. These values are reflected in the financial statements of these companies.

2) Group/Corporate view:
It is an optional view. Goods and services are valued using the corporate cost
value. For these prices, internal profits are eliminated from the legal view prices.

3) Profit center view:

This is an another optional view, in which negotiated prices can be used for
transfer of goods and services between areas of responsibility (profit center) and
used to determine their internal profitability.

 The combination of currency types and valuation views is referred as Valuation approach.
MATERIAL LEDGER SRINIVAS
1.3. Actual costing calculation:-
Actual costing is a material ledger functionality. It determines a periodic actual cost for each
material (procured or produced).

The material ledger actual costing can be used to value all material inventories: COGS, WIP, and
other internal consumptions.

When we use actual costing, all goods movement within the period are valuated preliminarily at
the standard price and all price differences and exchange rate differences are collected in the
material ledger database.

At the end of the period, an actual cost are calculated for each material based on beginning
inventory and actual receipts for that particular period. The actual cost is called “PERIODIC UNIT
PRICE (PUP)”.

NOTE:-

The PUP is the actual material cost that is calculated periodically by the material ledger
actual costing calculation

1.4. Material Price Determination Control:-

It refers to a field in material master data that specifies how the material price
determination is set.

This field is available only if material ledger is active, and it determines whether a material is set
to a part of Actual costing calculation or not.

There will be two options in price determination field

1. Transaction-based

2. Single-/Multilevel

1. Transaction-Based (2) :-

If you choose price determination 2 (transaction – based) for a material, the material is
not included in the actual cost calculation.

There are two possibilities to setup the price control (V or S):

 With price control V and price determination 2 (transaction based) the Material price is
calculated with Moving average price and used to value inventory.
 With price control S and price determination 2 (transaction based) the material price is
calculated with the standard price. And moving average price is calculated for information
purpose only (not for inventory valuation).
MATERIAL LEDGER SRINIVAS
In MM03 Accounting 1 Price determination

2.Single-/Multilevel (3) :-

If we choose Price determination 3 (single-/multilevel) for a material, the material will be

a part of the Actual costing calculation.

The price control has to be set to ‘S’(Standard). The standard price remains unchanged during the
period, and a PUP is calculated at the end of the period. The PUP is updated in the material
master data for information, and it can be used for material revaluation in the closed period.

1.5. Material Price Analysis, categories, process categories:-

Material price analysis – CKM3

Price analysis Transaction shows the valuated transactions for a given period, material, and plant
along with price and exchange differences within a price determination structure.
MATERIAL LEDGER SRINIVAS