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    Former Member
    Aug 12, 2008 at 06:34 AM


    Generally all raw materials (ROH), spare parts (ERSA), traded goods (HAWA) etc. are assigned as moving average price (MAP) because of the accounting practice of accurately valuating the inventory of such materials. These materials are subject to the purchase price fluctuations on a regular basis.

    Company generally use moving average on purchased materials with small cost fluctuations. It is most appropriate when the item is easily obtainable. The impact on margins are minimized which reduces the need for variance analysis. Furthermore, the administrative effort is low as there are no cost estimates to maintain. The cost reflects variances, which are closer to actual costs.

    The semi-finished goods (HALB) and finished products (FERT) are valuated with standard price because of the product costing angle. If these were to be MAP controlled, then finished/semi-finished product valuation would fluctuate due to data entry errors during backflushing of material and labour, production inefficiencies (higher cost) or efficiencies (lower cost). This is not a standard accounting and costing practice.

    Refer to OSS note 81682 - Pr.Contr.V for semi-finished and finished products.

    SAP recommends that standard price to be used for FERT and HALB. If actual price is required for valuation, make used of the functions of material ledger where a periodic actual price is created which is more realistic.

    e.g. how SAP calcualte the moving average price

    Goods Receipt for Purchase Order

    Balance on hand quantity + Goods Receipts quantity

    Balance on hand value + Goods Receipts value

    New Moving Average Price = Total Value / Total Quantity

    Invoice Receipt for Purchase Order

    Invoice price more than Purchase Order price

    additional value add to Balance on hand value then divided by Balance on hand quantity

    Invoice price less than Purchase Order price

    difference is deducted from the Balance on hand value (up to 0). The rest of the amount will becomes price variance. This will result in Balance on hand value is zero while there are Balance on hand quantity. If the Balance on hand value is enough to deduct, then the remaining value will be divided by Balance on hand quantity.

    When your Goods Issue price is constantly greater than your Goods Receipt price, it will result into zero value moving average price.

    OSS note

    185961 - Moving Average Price Calculation.

    88320 - Strong variances when creating moving average price.

    Never allow negative stocks for materials carried at the moving average.

    Best Regards,


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  • Aug 12, 2008 at 06:34 AM

    Dear sreedhar

    If the cost of the material does not fluctuate quite frequently, then you can use Standard Price. Normally, both for HALB and FERT, we use Standard Price.

    On the other hand, if your cost is fluctuating quite frequently, then you need to have Moving average price. This is used mainly for ROH that are purchased externally. The advantage of using moving average price for your raw materials is that your inventory costs will always reflect the current market cost.


    G. Lakshmipathi

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    Former Member
    Aug 12, 2008 at 06:35 AM

    Standard Price is a fix value and moving Price is the average of the price of purchase. Ideally Finished Goods are maintained as Standard Cost and Raw Material & Work in Progress are maintained as Moving Average Price.


    Rajesh Banka

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