3 valuations in Material ledger

[ashok_backiaraj]

Hi,

My client's requirement is as follows:

1) Legal valuation has to be in Local currency but on Actual Costing

2) Profit Center Valuation in Local currency but on standard costing - same as Group valuation

3) Group Valuation in Group currency in standard costing - Group valuation

Is this possible when, Actual costing Material ledger implemented?

I imagin, Legal valuation field in Material Master will be updated by periodic unit price when we run CKMLCP. Then Profit center valuation field in the Material Master will be updated when we run CK40N in standard costing PC valuation costing run. Then again we will run ck40n in standard costing for Group valuation to update Group valuation in Material Master.

If my client opts to run ck40n for legal valuation, then he should also be able to mark and release standard cost new price, in Legal valuation field of material master and actual costing will not release standard price for new period.

The requirement is typically complicated, as my client wants to maintain his Global template, though one country comes under actual costing requirement.

I would like to dig out answers from real time experience please.

Cheers,

Ashok

[Former Member]

Hi Ashok,

I think you are a little confused with Actual Costing here, i have implemented exactly the same combinations for a company in USA i.e. Local valuation and Profit center valuation with local currency and Group valuation with group currency. I always feel this combination makes most sense since Profit Center performance can be better reviewed if available in local currency, if we do this with group currency the group company would end up making profit center responsible for currency fluctuations between local and group currency. I hope it is clear.

Coming back to the Actual costing, many companies want to have this part, not to release Periodic Unit Price (PUP) to standard cost but to know the true cost of production, after allocating PPV and production variances from lower levels to higher levels. Once you implement Actual Costing sub module along with ML, you would see actual cost in Legal/Profit Center/Group valuations. Other benefits of having actual cost (PUP) is you can this to revaluate COGS (posted to GL at the time of PGI) that would help to give accurate profit and comparison of standard cost component split with actual cost component split; also map these cost components to CO-PA buckets.

Thanks

Venkata Ganesh Perumalla

[Former Member]

I can give you some information but not everything. I have gone through the deployment of material ledger using 3 valuations, but not the ones you are using. We used Local, Group and Group at Group. All 3 are at actual costing. What this means is that the local currency is the currency in the country where the plant exists. The group valuation is a straight conversion to US dollars from the local currency based on the currency conversion tables M and P rates. Note that both of these first two currencies can include intercompany profit if reflected on the transferring sales order between companies. The Group at Group is the US dollar conversion without the intercompany profit. We find this works for our business.

The other thing about material ledger is that you need to have a standard cost estimate so that material ledger can keep track of the cos component structure. The way it works is as follows:

Say the standard estimate shows labor=$100, materials=$200 and overhead=$300 for a total cost of $600. All transactions in the month using this material use the $600 standard. Now, when material ledger is run at month end, the PUP (periodc unit price) is calculated and let us assume the PUP values are labor=$150, materials=$250, overhead=$350 for a total PUP of $750. Material ledger already has tables with the details of the standard components against every transaction. Now it will apply the remaining adjustments totalling $150 to the proper cost components for COPA purposes. This is pushed to COPA using transaction KE27. Think of it like this...Actual cost is equal to standard ($600) plus/minus variances ($150).

Therefore, you always should have a standard cost estimate when using material ledger. At least that is my usage and understanding. I hope I provided useful information for you in some way.

David