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Different accounting entries for SFG/FG after variance settlement

Price control : SFG & RM are having MAP While FG is having SP.

1. When is Cost estimate transaction executed ? Month-end OR First-day-of-period ?

2. When material master is uploaded first time in real implementation, do we maintain any price for SFG/RM/FG ?? If Yes, for which material type and which price SP / MAP ?

3. When CK40N is executed in real business scenario, usually Is it restricted to run only for material type "only FG" OR Is it done for all material types FG/SFG/RM ? What is suggested practice considering in our scenario all SFG/RM are having MAP ?

4. When Variance is settled, following entries generated.

Variance settlement for SFG
Debit SFG Inventory GL Material of SFG
Credit SFG-COGM GL Prod order

Variance settlement for FG

Debit FG Price diff GL Material of FG & Profitability segment
Credit FG-COGM GL Prod order

Why system generated COPA document for settlement of FG Variance but not for SFG ?
In SFG Variance Settlement, inventory is updated. Is this correct ??

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6 Answers

  • Best Answer
    Oct 25, 2016 at 09:24 AM

    Hi,

    1. When is Cost estimate transaction executed ? Month-end OR First-day-of-period ?

    First day of the period

    2. When material master is uploaded first time in real implementation, do we maintain any price for SFG/RM/FG ?? If Yes, for which material type and which price SP / MAP ?

    For Raw material you have to maintain the price manually. If SFG/FG is producing internally, then you have to run costing after uploading BOM & master receipes of the materials.

    3. When CK40N is executed in real business scenario, usually Is it restricted to run only for material type "only FG" OR Is it done for all material types FG/SFG/RM ? What is suggested practice considering in our scenario all SFG/RM are having MAP ?

    You have to run it for materials which have price control indicator as S. Means SFG & FG only.

    4. When Variance is settled, following entries generated.

    Variance settlement for SFG
    Debit SFG Inventory GL Material of SFG
    Credit SFG-COGM GL Prod order

    Variance settlement for FG

    Debit FG Price diff GL Material of FG & Profitability segment
    Credit FG-COGM GL Prod order

    Why system generated COPA document for settlement of FG Variance but not for SFG ?
    In SFG Variance Settlement, inventory is updated. Is this correct ??

    Check the settlement profile maintained, here they have not selected the check box variance settlement to costing based PA.

    Regards,

    Mukthar

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    • Dear Mukthar

      Our SFG is having price control V. But it has BOM/Routing. Should we not include SFG in costing run ?

      We are not using costing based COPA. Instead we are using Account based COPA.

      Regards

      Kapil

  • Oct 20, 2016 at 05:28 PM

    Hi Kapil,

    SAP recommends moving average (V) for Raw material/purchase materials and Standard (S) for Semi-finished/Finished materials.

    Based on business requirement you can have "S" for Raw/purchase materials also. SAP doesn't restricts. hence talk to your business and find out their requirement.

    If select "S" then only variances are settled COPA.

    Thanks,

    Rau

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  • Oct 21, 2016 at 03:08 AM

    Dear Ratnakar

    Decision to have price control "V" for SFG was decided after considering business requirement only. No need to check with them on this.

    Do you mean to say that for price control "V", Variance is not settled to COPA ? Just want to confirm understanding.

    Other questions are still open. Please also suggest on them.

    Thanks

    Kapil

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  • Oct 24, 2016 at 02:38 AM

    Thanks Rau. I will check this note.

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  • Oct 24, 2016 at 12:44 AM

    Hi Kapil,

    Correct. variances doesn't flow to COPA.

    See this OSS note for moving average price for SFG and issues

    81682 - Pr.contr.V for semi-finished and finished products Symptom
    Unrealistic valuation prices for semi-finished products and finished products
    Other Terms
    Production order, moving average price, period-end closing, material ledger, CNACT
    Reason and Prerequisites
    SAP strongly recommends that you do not select price control V for semi-finished products and finished products, because doing so will very easily cause the calculation of unrealistic valuation prices. SAP recommends: Price control V for raw materials and trading goods; price control S for semi-finished products and products.
    If you nevertheless select price control V, take care in the following situations: 1. Unrealistic prices occur if materials are produced and also retire during one period (that is, the inventory at the end of the period is smaller than the total of aquisitions from production orders) and if, in addition, several production orders belonging to a material were finished in this period, and the production order settlement calculates variances at the end of the period. Every single production order carries out an inventory coverage check and may therefore cause the moving average price to be changed. However, the individual production orders do not check whether the inventory available at the end of the period has already been debited by another production order.
    Example: on 20 workdays in the period, 1 piece of material xyz was produced for each day and delivered to the warehouse at a price of USD 1000. At the end of the period there is 1 piece at the warehouse. Since an activity price of a participating cost center was higher than planned, every single production order calculates cost of goods manufactured of USD 1100 during the settlement. Every single one carries out a inventory coverage check and finds out that the variance can be posted completely to the inventory. That is, the ending inventory of one piece is debited with USD 20 x 100 and it consequently receives a price of USD 3000.
    2. A settlement is carried out although not all costs have yet been posted to the order. This can even result in a price of 0 for the delivered product.
    3. No period check of the costs is carried out on the order, that is, costs from previous periods may be settled.
    4. Settling orders is already possible in the 'Delivery completed' status.

    Solution
    Standard price for products together with possible manual price changes.
    If you are required to valuate semi-finished and finished products with actual prices that correspond to the costs of the actual production, SAP recommends you use the function of the material ledger for this. Here, a periodic actual price is created that is calculated on a much more reliable basis than the moving average price. A so-called price limiter quantity is used which makes sure that in the above example price differences are proportionally taken into account (95% of the total price differences) when valuating the 19 pieces withdrawn from material xyz which results in a periodic actual price of 1100 USD. In addition, it is possible as of Release 4.5 to even take into account the variances of the actual prices of the raw materials in the valuation of the semi-finished and finished products that are manufactured from it.

    Thanks,

    Rau

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  • Oct 26, 2016 at 04:15 AM

    Hi,

    You can run costing for SFG also, but the system will store the price under standard price. You can use it for reporting purpose and also used it for valuation for FG.

    Regards,

    Mukthar

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