Material Ledger Actual

Costing in SAP S/4 Hana

Material Management to Controlling Integration
Definition:

Material Ledger is a Tool that collects transaction data for materials whose
master data is stored in material master. The material ledger uses this data to
calculate prices to valuate these materials

Material Ledger in SAP S4 HANA is used for inventory valuation in multiple

currencies and actual costing. In SAP, the word material denotes goods or
services that we use for different transactions. These include purchasing,
sales, production, warehouse and inventory management etc

The material ledger is the basis of actual costing. It enables material

inventories to be valuated in multiple currencies and allows the use of different
valuation approaches.

It would be a good idea to have a better understanding about the Product Cost
Flow which includes:

1. Standard Cost Estimates and related configuration/processes

2. Work In Process/Variance/Settlement Processes under different
manufacturing scenarios
3. Material Valuation and Movements throughout the Supply Chain and
manufacturing cycle.

This helps to understand Material Ledger/Actual Costing in SAP quickly and

seamlessly.

We will discuss about Multiple Currencies and Valuation Approaches as we

move forward.

What are the benefits of material ledger?

When implemented properly, Material Ledger can bring transparency to
valuation chain with: Variance Visibility across the Inventory Value chain from
procurement to production. Variances Allocation to product that are otherwise
invisible. Periodic Actual Costing a tool for faster strategic decisions.
What are the disadvantages of material ledger?
Variance Accounting Issue –
Another disadvantage is that the variances from the standard price are
collected in a price variance account in FI.
It also does not correct the inventory account.
Likewise, we cannot assign the variances collected in the price variance
account to each material

Steps for Configuration of Material Ledger

Step 1-Currency setting check (T Code-OY01)
Spro-ref img-financial accounting-financial
accounting and global setting--ledger-ledger-
Check all currency setting on accounting screen
Step 2-Assign currency type and Define Material
Ledger Type (t Code-OMX2)
Spro img-Controlling-product costing Controlling -
Actual costing and/material ledgerassign currency
type and define material ledger type
Step 3- Assign ML Type to Valuation (T code-OMX3)
Spro-img-controlling--product cost controlling--
actual cost/material ledger--assign material ledger
tovaluation Area
Step 4-Activation of material ledger at valuation area
(T code-OMX1)
Spro-img-controlling--product cost controlling--
actual cost/material ledger--Activate material
ledger for valuation area
Step 5-Setting Check (T Code-CKM9)
Spro-img-controlling--product cost controlling--
actual cost/material ledger-- Activate material
ledger for valuation area
Step 6- ML Productive (T Code-CKMSTART)

Material Ledger Actual Costing

Material ledger actual costing is used to evaluate the stock at their actual
price. We use material ledger to evaluate the stock in their group and profit
center valuation. Before using material ledger materials are only valued in their
company code currency. If we don’t use material ledger, finished goods will
remain in their standard price.
Material Price Determination Control
There are two types of material price determination control
1. Transaction based
In the transaction based only same level price difference can be analyzed. In
the transaction based are unable the valuate the inventory at their actual price
because the lower-level price difference is not rolled up to the higher level. It is
only used to evaluate the inventory in multiple valuation views.
2. Single / Multi level
In the single and multi-level price difference amount will also be rolled up to
the actual price of material and the inventory will be valued at their actual
price. Price control will be changed to ‘s’ for all the materials. In case of price
control ‘v’ lower level price difference will not rolled up to next level.
Single Level Price Determination
In the single level system identify differences for product and some proportion
of amount will be rolled up and the remaining will be added to consumption.
Activity price difference will not be rolled up to the closing inventory actual
price. In the single level price determination only the material price difference
will be rolled up to the inventory actual price.

Multi Level Price Determination

In multi level price determination inventory will be valued at their actual price.
Material price difference and activity price difference will be rolled up from raw
material to finished good. PUP price for the inventory will be calculated which
will be considered as future standard price for the next month. PUP will then
further used for
1. Internal consumption
2. WIP valuation
3. Inventory actual price calculation.
Price Binding Indicator
Price binding indicator is used to fix the price determination of the material
master during material master creation. After assignment system will not allow
to change the price determination of the material master.
Price Unit Price (PUP)
In the single & multi level price determination PUP price will be calculated to
evaluate the material at its actual price. PUP price is used to evaluate the
materials in multiple valuation views.
Material Ledger Update Structure
Material ledger update structure is used to collects the values from different
categories of valuation relevant transactions. All the material update values will
be displayed in the material update structure.
Material Ledger Categories
Four types of material ledger categories can be defined those are
· Beginning inventory (a)
· Cumulative inventory (b)
· Consumption (c)
· Ending inventory (d)
Process Categories
Process categories are used to identify types of receipt and consumption.
Receipt can be of multiple types like goods receipt from production, vendor,
purchase order etc. Consumption can be of different types as well like
consumption for cost center or production / internal order etc.
Procurement Alternatives
A procurement alternative presents the different options for procuring a
material. You can choose the level of detail used to create the procurement
alternative by defining the Controlling level.
Currency & Valuation Profile
Currency and valuation profile determines which valuation views can be stored
in which currencies. Currency and valuation profile will be assigned to the
controlling area. If we want to evaluate the inventory in any specific currency
we must maintain that currency in the currency and valuation profile.
Distribution of Consumption Difference
This function allows you to distribute consumption differences from a physical
inventory to orders, or to subsequently debit the material or the finished
product.