Professional Documents
Culture Documents
Login / Sign-up
Technical Articles
Material Ledger/ Actual Costing is one of the complex tool provided by SAP to manage its inflows and outflows of core
manufacturing related materials in multiple currency and valuations. In this blog, I have tried to explain this functionality in detail
with example (mainly Actual Costing).
Basically Material Ledger/Actual Costing are the two separate functionalities which are inter-dependent and are incorporated in
the SAP Controlling module which are discussed below.
Actual Costing
Actual Costing is functionality provided by SAP to calculate actual prices i-e; PUP (periodic unit price) of inventories/ valuated
material including Raw Material (ROH), Semi- Finished Good (HALB) and Finished Good (FERT). It includes all the actual prices for
material in particular period.
Actual Costing Run (CKMLCP) is the month end activity, which is used to valuated the inventory in balance sheet at actual price
(PUP- Periodic Unit Price) by calculating and posting Production variance during the month on the Material which was previously
maintained at Standard Price (calculated from CK11N) in balance sheet.
Standard costing and actual costing can run completely separate from each other without any conflicts. The only decision to be
made is, what price you use for material valuation. You can mark and release your cost estimations from CK40N as standard price
to be used during the period. After the period is over and you run your CKMLCP you can decide in the closing entries if you want to
revalue the inventory (of last month) by the periodic unit price.
The figure below shows the process and entries for Production Variance without Material Ledger/ Actual Costing,
The figure below shows the process and entries for Production Variance with Material Ledger/ Actual Costing,
If ML / Actual Costing is active the following Price determination setting can be done in Material Master of material.
ML active ML not active
In S4/HANA, there are no changes in the Actual Costing process it is remain optional to client whether to use this functionality or
not as in SAP ECC.
Material Ledger
Material Ledger is a tool used to manage your inventory in multiple currencies and/ or perform multiple inventory valuation. It
allows the client to manage its inventory in three currencies which is previously (when Material Ledger is not activated) being
manged in only one currency with legal valuation.
If multiple valuations are used ML valuates the materials in up to 3 If multiple valuations are not used ML just store the
valuation views with 2 currencies material prices/stock values in up to 3 currencies
OR Example 2:
Used for parallel valuations. Material price/stock is valuated(costed Used if we want to store/display material
through CK11N) separately and stored in the specified currency. price/stock/transactions in multiple currencies.
For each valuation view we maintain separate Version in controlling through t-code: OKEV.
Example,
With Legal Valuation, you are able to valuate your business processes similar to how you would do that in the Company Code, using
Company Code Currency. Hence your financial reporting will be similar in Profit Center Accounting and FI.
In the Group View, you apply transfer pricing among Profit Centers at cost. Therefore, there are no intra-company transfer profits.
The only profits that arise will be with respect to non-group companies.
With the Profit Center View, you apply transfer prices amount Profit Centers with Internal Revenue and Internal Costs. Therefore,
rather than transfer the goods at Cost, the sender PC will “sell” the goods to the receiver PC. This differs from the Legal view, where
the group valuation is more like a intra-group transfer.
In report CKM3 for RM1, we see that the price difference between standard price maintained in RM1 material and actual price at
Good receipts is separately posted and shown under Price difference.
To Create a collective order, one of the SFG must have a special procurement key 81 in its MRP/ Costing view of master data.
As, we are using External activity “PCKG” at operation 0020. So when create Production order of any quantity the Purchase
requisition for this activity type based on required quantity and standard price got created. Then on the basis of the Purchase
requisition purchase order is created and Invoice verification MIRO is done against it.
Now the confirmation for SFG1 operation 0010 is performed. During confirmation the plan yield based on production quantity plus
BOM and activity from routing is suggested which is change by manually entering the actual quantity and activity cost. It also
suggests scrap of 2% maintained in MRP1 view of material master.
Figure below analyzes RM1 goods issue and SFG1 Production issue for Production order in Material price report CKM3N for RM1
and SFG1.
Now the confirmation for SFG2 operation 0010 is performed. The pertaining accounting entries and moment types are shown in
figure below,
Below is the figure to analyze RM2 goods issue and SFG2 Production issue for Production order in Material price report CKM3N for
RM2 and SFG2.
Now, we do the final confirmation for FG1 for operations “0010” and “0020” as shown in figure below,
Material Price Analyses report CKM3 for FG1 is analyzed, as shown in the below figure,
Following are the additional reports to further analyze the FG1 Material activity, purchase price and production variances.
After doing post good issue/ delivery where the accounting entry is generated for Cost of sales. In Material Price analysis report
CKM3 for FG, we are now able to see the impact of this sales as shown in below figure,
Note: If costing based CO-PA is activated, we can see the document generated for delivery and billing in Profitability Analysis by
using t-code KE24 only after billing.
Actual Costing Run (CKMLCP):
Pre-requisites:
1) Create and mark cost estimate in period 1 for period 2 (T-Code: CK11N)
With ML active, you may use CKMLCP to calculate the actual price and mark it as the further price (but only for two periods later.
Let’s say, if you do post closing for period 06 and get a periodic unit price, this price can only be marked as future price in period 08
or later). This marked future price can be released via ck40n, ck24, CKME.
If the company decides to go for periodic unit price every period. It is recommended to execute CKMLCP and further processes till
release of periodic unit price from period 6 to 7 with material price determination maintain as 3 and S.
Company may decide whether or not to use the PUP (actual price) as future price. If it does not want so, use the normal Product
Cost Planning process from CK11N/ CK40N.
If ML is active with price determination 3 and you have already performed transactions to the material during the current period,
the costing release (CK40N or CK24) of Standard price to material is not possible.
If with ML active you use price determination 2 then you can have both standard and moving average price (S or V) but cannot do
inventory valuation at actual costing (PUP). So, if you decide to use 2 and V then the purpose of ML would only be for parallel
valuation (not for actual costing).
CKMLCP Execution:
CKMLCP is executed to calculate Period Unit Price (PUP), which basically represent average actual cost for material or semi
finished goods. Execution of CKMLCP includes the below steps:
Step 1: Selection
Execution of Selection steps identified, the list of materials for which the Periodic Unit Price calculation need to be executed during
CKMLCP. The selection step work on the below concept:
After executing the Selection step, the system will identifies all the materials for which Periodic Unit Price should be calculated
during the CKMLCP as in our case materials MAK2 RM1, MAK2 RM2 MAK2 SFG1, MAK2 SFG2 & MAK2 FG1 are selected.. The
materials selected during this run are based on following criteria,
2- It includes all the materials for which any goods movement happened during the current period or any of the previous periods
after the go-live off Material ledger in Plant
In this step the system describes the sequence in which the Periodic Unit Price for all the selected materials needs to be calculated.
It determine the group of materials, the cost of which don`t depend on the cost of any other materials. Generally these are
externally procured materials from external vendor (not from internal organization transfer, or purchase from some other plant of
same company). Like in our case raw materials MAK2RM1 and MAK2RM2 gets selected. These materials are considered for actual
PUP calculation at single level price determination.
All the other materials, manufacture in-house, sub-contracting, purchase from some other affiliates in the same company are
considered for multilevel price determination.
When using Actual costing, all materials are valuated with a preliminary price (standard price) that must remain constant during a
period.
Variances (price differences and exchange rate differences) arise during the period for this preliminary valuation price.
At the end of the period, you can use the single-level price determination to assign the variances recorded in the period for each
material.
In our case the Price difference for RM1 & RM2 are calculated and production variance for SFG1, SFG2 & FG1 are calculated.
The below figure shows the impact of single level price difference on the ending inventory of FG1.
In this step system do the PUP price calculations by considering the below prices:
1- Variance between the Standard price of raw materials with the Single level PUP calculated at -single level price determination
3- Variance allocation performed through the actual flow of goods on actual quantity
4- Variance between inter-plant (under same company, may or may not be under the same co. codes) transfer are also consider if
any goods movement happened between these plants, otherwise not
5- All other variances having an impact on lower level materials actual cost are consider for calculating actual PUP for higher level
materials.
The screenshots below depicts the the impact of Multi-Level Price determination on the RM1 to SFG1 highlighted in blue circle.
The picture below shows the the effects of Multi level Price determination on SFG2 from RM2 consumption.
Finally the the variances in consumption of SFG1 & SFG2 for FG1 would be transfer to FG1 Receipt from lower level Variances as
shown in the figure below.
In this step system do the revaluations of all the consumption based on the actual PUP calculated at single level or multilevel price
determination. The main purpose of this step is to bring the cost of consumption for Good Finished to actual cost, so that the profit
margins are not over or under stated.
The below image illustrates the impact of Consumption Revaluation on FG1 as the cost from non-allocated is assigned to
Revaluation of Consumption.
Step 6: WIP revaluation
In this step system do the revaluations of all the Work in progress based on the actual PUP calculated at multilevel price
determination.
As in our scenario WIP is not calculated for Production Order so we skip this step.
At post closing step, system do the posting of all the variances calculated during single level or multilevel price determination and
do the revaluation of consumption and closing inventory, and passed the necessary entries.
After this the material master price control in the previous period will be changed permanent to V, from S. But in the new period, it
will still be S.
Below are Accounting entries for the analysis resulted as a result of Post Closing execution.
In above entries you see that here the activity Price variance is charge to cost center and FG Inventory directly rather than to Cost
center and Production Order. Here we don’t have to run t-code CON2 for Revaluation of activity at actual Price.
Material ledger provides the functionality of converting the current Periodic unit Price (PUP) as standard cost of next month. This
can be done via executing the Mark material price step.
When you mark price with CKMLCP, the future price in accounting view 1 is changed together with the “valid from” date.
After executing this step, the PUP of current months gets updated as marked cost estimate for coming month. For converting, the
PUP of current month as standard cost of next month autoatically, we need to activate Dynamic price release.
This Blog is aimed to give the concept and use of Material Ledger/ Actual Costing and what benefits an organization gains from
this functionality. Below are some references which are knowledge full to readers if they want more insight of Actual Costing. Hope
that this article is able to deliver what it is destined too. It is requested from readers to please share their feedback. Your time and
efforts would be highly appreciated.
References:
Special thanks to Srinavasa Kasireddy
https://blogs.sap.com/2019/03/07/material-valuation-with-material-ledger/comment-page 1/#comment-453516 – By
Srinavasa Kasireddy
https://blogs.sap.com/2014/05/12/automation-of-actual-costing-run-ckmlcp-in-material-ledger/
https://archive.sap.com/discussions/thread/1772674
https://archive.sap.com/discussions/thread/3346981
Assigned tags
FIN Material Ledger | FIN Controlling | FIN Cost Object Controlling | SAP S/4HANA |
Related Questions
Need tables to develop custom report for CKM3-Price Determination Structure view in S/4 HANA 1709
By Paranthaman V , Invalid Date
Variance collection & allocation to next level/consumption with Material Ledger Actual costing
By pranitha A , Invalid Date
10 Comments
Bhaskar Basam
Bhaskar
Farooq Baig
very well explained whole process, waiting to see your other blogs.
Former Member
Nitin Goyal
Nice document.
Just one addition, In case of Material price determination 2 and price indicator in material master is “S”, We could run actual
costing (PUP).
In few companies, Price determination 2 is used and “S” is used for SFG & FG and “V” is used for Traded goods and RM. In such
scenario, Actual costing could be used for SFG and FG
Regards,
Nitin Goyal
G Lakshmipathi
Paul Constantine
Raja Kumar
MA Aleem
Abdullah Galal
Rosario Selvakumar