Material Ledger

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Get understanding of how the Material Ledger works.

Material ledger 

The Material Ledger’s designation is to handle actual costing by collecting price differences against standards, and manage inventory in multiple currencies using actual prices.

Use the Material Ledger to manage inventory in both standard cost and actual cost.   It means standard cost are considered ( ~ total cost of performing an operation or producing a good or service under normal conditions ) and used during a period of time ( month ) to value any material movement. And at the end of the period, the Material Ledger calculates the actual costs for the period. This actual periodic cost is an actual wheighted moving average price.

Periodic unit price is used to revalue inventory at month end. It is available only only if Settlement Price Control 3 indicator is set.

Actual cost component

The actual cost component split groups actual costs into "folders" across multiple manufacturing levels

Process overivew

  1. Setting Inventory Valuation Method
    • Materials with standard price control will be adjusted to an actual weighted moving average price at month end.
    • Material price determination 
      • How the system should react after each business transaction?
        • Transaction-based ( V (Moving average) )
        • Single/Multilevel ( only S (Standard price) )
  2. Configuration
    • Activate the Material Ledger for all plants that belong to a company code ( Transaction OMX1 )
    • Create Material Ledger types to define the available currencies
    • Maintaining Number Ranges for Material Ledger Documents ( Transaction OXM4 )
    • Automatic Account Determination ( Transaction OBYC )
      • Chart of accounts of the company code
      • Valuation grouping code of the valuation area
      • Transaction or event key (internal processing key)
        • Inventory Posting (BSX)
        • Price Differences (PRD)
          • None (blank): Variances related to purchase price variances
          • PRA: Variances related to goods issues movements
          • PRF: Variances related to production order variances
          • PRU: Variances related to stock transfer postings (external amounts)
        • Price Differences: Single Level (PRY)
        • Exchange Rate Differences from Material Ledger Lower Levels (KDV)
        • Price Difference from Inventory Revaluation (UMB)
        • Exchange Rate Differences for Open Items (KDM): purchase order invoice posted with an exchange rate different from the goods receipt for materials with standard price
        • Price Differences from Stock Transfer (AUM)
        • Activity Price Revaluation (GBB-AUI)
        • Revaluation of Other Consumables (COC)
        • WIP from Activity Price Differences (WPA)
        • WIP from Material Price Differences (WPM)
        • WIP from Material Price Differences Write-Off (PRM)
        • WIP from Activity Price Differences Write-Off (PRA)
        • Accruals and Deferrals Account in Material Ledger (LKW)
      • Account grouping
      • Valuation class
    • Productuon start up
  3. Preliminary valuation at standard cost and the recording of price differences
    • Standard Business transactions relevant for valuation are translated using actual exchange rates at time of posting
  4. Price determination, the calculation of the PUP for single and multilevel products
  5. Business transactions
    • Initial Entry of Stock Balances
    • Price difference (PPV)
      • A purchase price difference or purchase price variance 
    • Exchange rate
      • The exchange rate of the GR differs from the rate at the time of invoice receipt
    • In-House Production variances
      • Production order variance is transferred the Material Ledger when the order settlement is carried out.
    • Stock transfer
      • When transferring a product between two plants with different standard costs
    • Debit and credit entries made directly to a material  (Transaction MR22)
  6. Revaluation of inventory with the PUP

Multiple currency valuation

  • Local currency for legal valuation in the currency of company code
  • Group valuation for corporate group valuation for reporting purposes
  • Profit center for profit center valuation or for transfer pricing functionality

Reporting

Transaction CKM3N

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