Complete Configuration with Test Scripts

SAP

Material Ledger By Guntupalli Hari Krishna

Index:

Material Ledger Overview :

What is Actual Costing and Material Ledger?

Material Ledger is a tool that collects data for materials whose master data has been saved in a material master record. This data is used to calculate prices to valuate these materials forming the basis for actual costing and enabling inventory valuation to be carried out in up to three currencies or valuation methods.

If Actual Costing is used, system can use the periodically collected values to automatically calculate new inventory values and valuation prices, independently of one another and in different currencies or valuation methods.

Introduction:

Material ledger (ML) is functionality in SAP, which helps to calculate Actual Cost for materials and also provide the facility of multiple parallel valuations in multiple currencies. ML has two major functionalities, first to calculate actual cost of materials, semi/finished goods, and second provide an opportunity to calculate actual cost on multiple valuation such as Legal, Group, & Profit center valuation. In this document we will see fundamental concept of material ledger, how the actual cost is calculated for different business scenarios.

Actual Costing in SAP

Actual Costing has a purpose of calculating actual cost for goods manufactured in-house and materials procured from outside. Calculation of actual cost for finished goods, raw materials is very difficult as we don’t know many of actual costs when business transactions are performed. Business transactions are performed throughout the months and at that time we don’t know the actual cost of our production activities, expenses for full months, total activities performed in month, overhead cost etc., so it’s become difficult to calculate actual cost for finished goods, raw material purchased from outside. The situation becomes more difficult when we talk about a Multinational organization having manufacturing plants in different countries and transfer of goods is happening between groups.

Material ledger works on a concept on first recording the material movement in Standard Cost and then accumulating the Variance to calculate the Actual cost.

In Material ledger the benefit of standard cost is retained as all the materials movements are initially recorded at Standard Cost and variances are collected to come to actual cost. Actual cost is calculated at the end as part of Period End Closing, and the actual cost is termed as Periodic Unit Price (PUP).

Periodic Unit Price (PUP)

Periodic Unit Price refers to the average actual cost of materials in material ledger.

For material procured from outside, PUP represent Standard Cost plus Capitalized Purchasing variances (like, purchase price variance, exchange rate variance etc.)

For in-house produced material, PUP represents Standard Cost plus manufacturing variances (like quantity variances from raw material & activity, purchase price variance, multi-level variances coming from raw materials etc.)

For calculating the PUP, only opening stock and receipt is consider, but not the consumption.

Consumption is revalued at closing cost. First the consumption is booked at standard cost and then it’s revalued during ML period end closing, with the difference of New PUP and Standard Cost.

PUP is updated in Accounting View 1 of material master data.

Pre requisite for Material ledger

a. Material price determination should be 3 (i.e. Single/Multilevel price determination)

b. All procurement cost should be linked to purchase order

c. All manufacturing cost, overhead expenses should be part of activity cost (i.e. product cost value flow)

Different Scenarios:

Scenario 1: External Procurement of Raw Materials

Step 1: Purchase requisition: No journal entries, as it’s a pre-commitment.

Step 2: Purchase order: No journal entries, it’s a commitment for Budget

Step 3: Goods receipt: when we receipt the raw material, at that time we are not aware of our actual cost of material then the initial recognition happened at Standard cost.

Stock of Raw material A/c ………….. Debit (Std. Cost * Actual Qty.)

To, GR/IR A/c… (Credit) (Std. Cost * Actual Qty.)

The value posted at GR is equals to (Std. Cost of raw material multiplied by Actual Quantity receipt)

Material ledger: at the time of good receipt, in material ledger there is an entry happened for receipt under purchase, where entry happened for stock quantity & value is recognized as standard price.

Step 4: Invoice Receipt:

GR/IR A/c ……………………………………. Dr. (Std. Cost * Actual Qty.)

Exchange rate difference A/c …………Dr. (Exchange rate variance)

Purchase Price Variance A/c ………… Dr. (Balancing figure)

To Vendor A/c (Invoice Value)

Material ledger: at the time of invoice receipt the purchase price variance is recognized in material ledger under zero quantity receipt, which increases the actual price of cumulative inventory. In some of cases we can also see exchange rate variances at time of invoice receipt. Exchange rate variance generally arises when the transaction currency is different than legal currency and average actual exchange rate is different than budgeted exchange rate.

Scenario 2: In-house production of Finished goods

Step 1: Goods Issue to Production/ Process Order

Raw Material Consumption A/c ……………… Dr. (Std. Cost * Actual Qty)

To, Stock of Raw material A/c ….. Cr (Std. Cost * Actual Qty)

In Controlling, Order should be debited with raw material consumption with a value equals to (Std. Cost * Actual Qty).

In Material Ledger, consumption entries will happen for raw material with Consumption of Raw material quantity as Actual quantity issue to order and value of consumption as (Std. Cost * Actual Qty).

Step 2: Activity Confirmation for completion of production activity

When production/ process order activities are confirm, then order is debited/charged with the cost of activity (Plan Activity rate * Actual Activity), and the production cost is credited. This entry is passed in Controlling, but no entries happened in FI.

Step 3: Goods receipt, finished goods receipt as part of order completion.

Stock of Finished Goods A/c ………………… Dr. (Std Cost * Actual Qty) BSX

To, Finished Goods manufacture A/c (Std Cost * Actual Qty) GBB

In Controlling, order is credited with cost of finished goods manufactured i.e. (Std Cost of FG * Actual Qty produced).

In Material Ledger, there will be entry in the receipt for finished goods. Inventory/volume in KG will increased by quantity receipt during goods receipt and value will increased by (Standard cost of FG * Actual Quantity receipt)

Step 4: Variance Calculation & Settlement

Once we do the variance calculation then variance represents the difference between Total cost charged to process/production order and Cost of Finished good receipt. These variances basically represent quantity variance of raw material and activity. i.e. (Actual Quantity less Plan Quantity)* Standard rate.

Variance calculated at this step gets posted in Material ledger to adjust the actual cost of finished goods produced.

Scenario 3: Sales of Finished goods (FG)

Step 1: Sales order; no accounting entries are created in FI. No impact in material ledger.

Step 2: Goods Issue to Customer; when goods issued to customer, in financial accounting the entries are recorded for actual quantity sold @ Standard cost of finished goods.

Cost of Goods Sold A/c ………………………….. Dr. (Std. cost of FG * Actual Quantity)

To, Finished goods Inventory A/c (Std. cost of FG * Actual Quantity)

In Material ledger: goods issue to customer is recorded in material ledger as consumption of raw material. The Actual quantity is recognized at standard cost.

Step 3: Billing document released

Customer A/c ……………………………………..DR

To, Sales Revenue A/c

Step 4: Payment receipt,

Bank A/c …………………………………………DR

To, Customer A/c

Step 5: Period end closing: when we do period end closing activity in ML, the consumption is revaluated with the different between actual cost (periodic unit price) and standard cost of finished goods. The price difference & exchange rate difference are proportionately adjusted between consumption & closing inventory.

Illustration:

To illustrate the scenario in more details, assume that we are manufacturing finished goods FGA, which is made of raw material RM1 & RM2, and two activity X & Y are performed to convert raw material in finished goods. In below table represent Plan standard cost of finished goods.

Table 1

Assume that we have created a production order to manufacture 10 kg of finished goods FGA. The details of value which will be posted at different task like Goods issue, Activity confirmation & goods receipt are given below. I have assumed actual quantity as different then plan quantity so that we can check variances.

Table 2

Here we can see the total variance of 140 USD, basically represent quantity variance.

Table 3

Assumed, actual rate different than plan rate. Here we can see the calculation of lower level variance.

PUP Calculation for finished goods FGA

PUP is calculated on the ratio of total cumulative cost with total cumulative quantity. The formula is given below.

In the below table the calculation of average actual cost is shown

Assuming the opening stock is zero in table 4.

Goods receipt from order is actual quantity @ standard cost. Details can be verified from Table 2.

Variance from order of 140 USD is basically the difference between total debit cost & total credit cost to production order, which is quantity variance. (Table 2)

Lower level variance of 95 USD is price variance (Table 3)

PUP is {(630+235)/10} = 86.50 USD/Kg

Goods issue to sales order is initial recorded at Std. cost

Revaluation of consumption {(PUP – Std Cost)*Actual Qty} i.e. {(86.5 – 63.0)*5} = 117.5 USD

Closing inventory is also revaluated with PUP.

Table4 4

Conclusion:

With the help of this document I have tried to focus on basic functioning of material ledger with concept. It will help to understand how the variances are moved from raw material, activity to finished goods & to closing inventory and consumption.

CO-PC-ACT transaction code list:

Transaction Description

CKMDISPACT Technical Activity Type View.

CKMD Transactions for a Material.

CKMDISPDOC Technical View ML Document

CKMDISPPOH Technical View of Order Development

CKMDISPTAB Technical View of ML Master Data

CKMDUVACT Distribution of Activity Differences

CKMDUVMAT Distribution of Inventory Diffs

CKMDUVREC Enter Activity Differences

CKMDUVSHOW Display Inventory and Activity Diff.

CKME Activation of Planned Prices

CKMF Allow Price Determination

CKMF_RUN Allow Price Determination for Run

CKMG Allow Closing Entries

CKMG_RUN Allow Closing Entries for Run

CKMH Single-Level Price Determination

CKMH_RUN Single-Level Price Det.for Costg Run

CKMHELPWIP Helpdesk for WIP

CKMI Post Closing

CKMI_RUN Post Closing for Costing Run

CKMJ Display Organizational Measures

CKMJ_RUN Organizational Measures for Run

CKML_FPR1N Edit Production Process

CKML_PRICES_SEND Send Material Prices

CKML_SURF Edit Prcrmnt / Cnsmptn Alternatives

CKMLAVREXP AVR Erklärungstool

CKMLAVRPERD Display period values

CKMLCP Cockpit Actual Costing

CKMLCPAVR Alternative Valuation Run Cockpit

CKMLCPMLBF Material Ledger Budget Cockpit

CKMLDC Debit/Credit Material

CKMLDM Debit or Credit Material

CKMLLA Prices in the Material Ledger

CKMLLACHANGE Display ActvPrices, Change NO_SETTLE

CKMLLACREATE Create ML-AT Master Data Manually

CKMLLANOSETTLE Ind.'Do Not Consider Price'

CKMLLASHOW Display Activity Prices

CKMLMAT Display Material List

CKMLMV_CA Edit Controlling Level

CKMLMV_MCA_N Mass Maintenance: Controlling Levels

CKMLMVCHECK Quantity Structure Consistency

CKMLOH PO History/Multiple Currencies

CKMLPC Price Change

CKMLPOH Order History Display

CKMLPROT Delete Logs

CKMLQS Valuated Quantity Structure(M-level)

CKMLRUNCUMDEL Delete costing run cumulation

CKMLRUNDEL Delete Costing Run (Actual Costing)

CKMLRUNREORG Reorganization of Costing Runs

CKMLSTATUS Materials by Period Status

CKMLWIPDEACT Check Report: WIP Deactivation

CKMLXPRA46A Postprocessing Report for 46A-XPRA

CKMM Change Price Determination

CKMM_RUN Multilevel Pr. Deter. for Cstg Run

CKMPCD Display Price Change Document

CKMPCSEARCH Price Change Documents for Material

CKMPROTDIS Display Log

CKMPRP Maintain Planned Prices

CKMPRP2 Maintain Future Prices by Profile

CKMPRPN Price Maintenance

CKMREDWIP Value Flow Display for Reduced WIP

CKMREP Repair Program for ML Tables

CKMS Material Ledger Docs for Material

CKMSTART Production Startup of Mat. Ledger

CKMTOPPRICEDIF Mat. with Highest MAP Difference

CKMTOPSTOCKVAL Materials w/ Highest Inventory Value

CKMVAPP Data Transfer: Val. Production Plan

CKMVFM Value Flow Monitor

CKMVFM_DEL Delete Extract

CKRU00 Create ML Costing Run

CKRU01 ML Costing Run, Create Profile

CKRU02 ML Costing Run, Change Profile

CKRU03 ML Costing Run, Display Profile

CKRU04 Display Selection

CKRU05 Display ML Costing Run

CKRU06 Delete ML Costing Run

CKRU07 Plants in Costing Runs

CKRU08 Display Levels

COMLI Post WIP Closing for Activities

COMLWIPARCH Archive WIP Quantities Document

COMLWIPDISP Trans. For Prog. Display_WIP_OBJ_M

COMLWIPDOC Display WIP Quantities Document

KALNRCHECK Consist. Check for Costing Run Nos.

KALNRREORG Reorg. of Old Costing Number Entries

LACCS CO_ML_DISPLAY

MGV_CORRECT Checks + Corrects Quantity Structure

MLCCSPD Cost Components for Price

MR11 GR/IR account maintenance

MR11_OLD Old GR/IR account maintenance

MR11SHOW Account Maint.Docu.Display-Reversal

OMRW Treatment of Exch. Rate Differences

OMX_NLINK_DISP Assign Contr. Level to Process Cat.

OMX_NRULE_DISP Display Controlling Levels

OMX_UMB_ACCOUNTS Display Accounts for Account Key UMB

OMX0 Assign ML Movement Type Groups

OMX1 ML Activation in n Valuation Areas

OMX2 Define Material Ledger Type

OMX3 ML Assignment of Valuation Area

OMX4 Number Range Maintenence: ML-DOCU.

OMX5 Dyn. Price Release Plan. Pr. Change

OMX6 Texts for Currency Types/Valuations

OMX7 Definition ML Movement Type Groups

OMX8 Assign Material Update Structure

OMX9 Define Material Update Structure

OMXA Display Quantity Structure Type

OMXB Define Naming Rule

OMXC Rules for Name Formation

OMXD Maintain Naming Structure

OMXE Assign Naming Structure to Plant

OMXF Activate Actual Cst Component Split

OMXW Activate WIP at Actual Costs