Skip to Content
author's profile photo Former Member
Former Member

Overhead Actualization in ML and Eleminate Operational inefficiencies

Hi Expert,

My client is a big group of companies and one of its companies has a issue due to actualization of OH.

That company has few plants and they are doing vertical production from producing raw material to FG within that particular company.

Production in that plants fluctuates drastically and in certain periods plant do not reach to average utilization of capacity. actually capacity is underutilized.

But actual major OH cost such as Depreciation , Wages are most others remain intact. So due to the fact actual activity price is increased(Actual Cost/actual qty which is very much lower than the average). and this will cause unrealistic Valuations of material.

So the requirement from the user is not to roll up this inefficiencies to the Material and which should be able to be recognized as a period Cost.

How this requirement can be fulfilled within and environment ML.

I have seen the accrual method of ML but i do not believe that address above mentioned requirement. (If anyone think that this will help us can i get more information about its behavior in current month and subsequent month etc.)

So experts, looking forward to your valuable support and advice in this regards.

Thanks in advance.

Regards,

Azar

Add a comment
10|10000 characters needed characters exceeded

Assigned Tags

Related questions

1 Answer

  • author's profile photo Former Member
    Former Member
    Posted on Oct 02, 2014 at 06:43 PM

    Hi Experts,

    Is there anyone who can direct me or give me a hint about a way that i can accomplish the user's requirement at this juncture. I believe this as a normal situation under this current unpredictable global market. So in SAP there must be a way to handle this kind of requirement with ML.

    Thanks in advance again.

    Regards,

    Azar

    Add a comment
    10|10000 characters needed characters exceeded

    • Former Member Former Member

      Hi Azar

      Alternate Valuation Run (Txn CKMLCPAVR) is similar to CKMLCP. This method of valuation gives ability to combine more than 1 Period to calculate the Weighted Average Price. therefore, as such, the fluctuations are normalized to good extent.

      For example, users can

      1) combine period 1 & 2 (and period 3 & 4...) and calculate Weighted Average Price

      2) combine period 1, 2 & 3 (& period 4, 5 & 6...) and calculate Weighted Average Price

      3) combine period 1, 2 3 & 4 (& period 5, 6, 7 & 8...) and calculate Weighted Average Price

      4) combine all periods 1 to 12 and calculate Weighted Average Price.

      Therefore, several combinations of the Price can be recorded. However, only one of the combinations can be posted to cost center. not all. Also, AVR does not need period closing like CKMLCP, however, it is better to calculate prices after all postings for the period are complete. The posting is done in FI and hence FI period must remain open.

      AVR also gives ability to post to Local Ledger. The Leading Ledger material valuations will not be impacted.

      AVR, if not used for Local Ledger posting, can be useful tool for management reporting: analysis of prices over a period of time ignoring the fluctuations in between.

      Satya

Before answering

You should only submit an answer when you are proposing a solution to the poster's problem. If you want the poster to clarify the question or provide more information, please leave a comment instead, requesting additional details. When answering, please include specifics, such as step-by-step instructions, context for the solution, and links to useful resources. Also, please make sure that you answer complies with our Rules of Engagement.
You must be Logged in to submit an answer.

Up to 10 attachments (including images) can be used with a maximum of 1.0 MB each and 10.5 MB total.