Effect of Material Ledger on PC CO and FI

[Former Member]

Hello All,

This is a very generalized question. We are soon going to activate Material Ledger. I want to know what effect will it have on our current processess and procedures.

For example currently we use CK40N to create cost estimates. I believe we will now have to use CKMLCP instead. I dont know if my observation s right.

The bottom line I need Assistance in figuring the impact of material ledge on CO specially product costing, FI and MM

If you can point out towards a particular document on online forum that would be great too.

Thanks

[former_member588240]

Material inventory values are normally carried in one currency (Local Currency) in the SAP system. The material ledger component enables the R/3 System to carry inventory values in two additional currencies/valuations. Therefore, all goods movements in the material ledger are carried in up to 3 currencies or valuations. Currency amounts are translated into foreign currencies at historical exchange rates directly at the time of posting. Businesses such as those in high-inflation countries can therefore carry their inventories in a more stable currency (such as US dollars). This reveals inflationary effects on inventory values.

The product costing other than actual costing/ material ledger represents legal valuation. If you use transfer prices to represent value flows in your company in different valuation views, you must use the material ledger. This allows you to carry your inventories in three different valuations (legal valuation, valuation for reporting purposes, and profit center valuation).

2. There will be impact in CO month end closing. The CO month end closing processes have to be changed to accomodate Actual Costing/ Material Ledger.

3. MM: (1) Inventory valuation in additional two currencies. (2) You must also use Logistics invoice verification (t.code: MIRO) because ordinary invoice verification does not support the Material Ledger component.

4. FI: If you have activated parallel currencies, you can derive maximum benefits from Material Ledger.

[Former Member]

Hello Ganesh,

I must say I couldn't have expected a better answer. A few more questions have sprung up in my mind after reading your post.

What sought of changes have to be accommodated in CO closing process. Can you give me a before/after example.

As far as my understanding goes I ll have to run CK40N first so that we have a standard price but the estimate should not be marked and released. After that run CKMLCP to revaluate the inventory with the periodic price. I might be entirely wrong so please correct me.

Also, I wanted to know what you meant when you said

"Inventory valuation in additional two currencies"

Is this a benefit of ML that you were mentioning or is it an issue that would require additional config on part of MM team.

Thanx

[Former Member]

just wanted to...

[former_member588240]

Actual costing/Material Ledger provides the following main functionalities: (1) to carry material prices in multiple currencies and valuations and (2) Cost accounting using actual prices.

Actual costing helps in determining actual costs for externally procured materials (raw materials) and materials manufactured internally. In actual costing, all good movements (including raw material and packaging material) are valuated preliminarily with the standard price. (Recommended by SAP) At the same time, all price and exchange rate differences for the material are collected in the material ledger. At the end of the period, an actual price is calculated for each material based on all of the actual costs of the particular period.

The actual price that is calculated is called the periodic unit price and can then be used to revaluate the material stock for the period to be closed. In addition, you can use this actual price as the standard price for the next period. Actual costing determines what portion of the variance is to be debited to the next highest level using material consumption. With the actual BOM, variances can be rolled-up over multiple production levels all the way to the finished product. Further you can even take into account variances from cost centers into the products.

In CO month end closing, OH, WIP, variance (Actual vs Target cost) calculations are done. Probably these calculations are done based on the standard cost estimate as of now (before implementing ML/Actual Costing). There is accounting entries passed by the system internally.

With the activation of ML/ Actual Costing, how these calculations are going to change. You need to ask the business/ functional team. Also you may have to need to decide about running assessment cycles.