Actual Costing with the Material Ledger in SAP ERP

Vanda Reis

• Publisher: SAP PRESS
• Year: 2015
• ISBN:
  9781493212460
• Edition: 2
• Topic: Computer Science
• Subtopic: Computer Science General
• Index: Computer Science

“A journey of a thousand miles begins with a single step.”
— Lao-Tzu (604 BC–531 BC), The Way of Lao-Tzu

1Introduction

The Material Ledger may be one of the most ingenious tools that exists in SAP ERP software. Since its conception, the Material Ledger has had continuous improvements in each release, always creating something new to learn and raising questions never considered before that must be answered.

The Material Ledger is classified as a subledger of the General Ledger (GL) for materials, but it can also be a powerful cost-management tool. This book is intended to guide you from the basic idea of the Material Ledger in releases such as R/3 4.6C, through complex scenarios available in the most recent release in SAP ERP 6.0 enhancement package 7 (which we will refer to as EHP 7 in this book), and everything in between.

In this resource, you will learn the concepts of the Material Ledger, relate these concepts to the accounting documents (Financials, Controlling, and Profitability Analysis), and understand how processes flow within the system. To help illustrate these processes, we will use the example of a chocolate factory to show how the different business processes can create variances that affect the Material Ledger and the actual costing calculation.

This book shows not only the technical and mathematical explanation of how the Material Ledger calculates actual costs, but also the Material Ledger integration with Financial Accounting (FI). By the end of this book, you will have a complete understanding of the Material Ledger, from the original concept to the most complex functions available in the latest releases.

This book should serve as a guide for costing accountants, project leaders, and product cost consultants who are part of a SAP ERP implementation that includes product cost and inventory valuation processes.

Because the Material Ledger subject is integrated with most of the SAP ERP areas, we assume you are familiar with or have other sources of information in subjects such as product cost planning (CO-PC-PCP), cost object controlling (CO-PC-OBJ), Profitability Analysis (CO-PA), and SAP General Ledger.

1.1Structure of This Book

The book is structured in three main parts. Each part and chapter is described in the following sections.

1.1.1Part I: Introduction to the Material Ledger

In Part I, we discuss the basic product cost and Material Ledger processes and configuration. We present only the basic product cost information that is relevant for the Material Ledger without going into detail about how product costs are configured and used in the SAP ERP system. By the end of Chapter 5, you will have all the configuration and master data necessary to start running the Material Ledger scenario examples.

• Chapter 2: Material Ledger Basics In this chapter, we discuss the basic concepts of the Material Ledger and its use. We show you concepts such as price control, procurement alternatives, inventory valuation methods, price determination, categories, process categories, procurement and consumption alternatives, and controlling levels.
• Chapter 3: Product Cost Planning
  Here we review the standard product cost configuration that is used for product costing calculation and also shared with the actual cost. Here you see the master data (cost centers, activity types, work centers, bill of materials, routings, and activity types) as well as the basic data (planning rates, materials standard prices, cost component split, and costing run results) that are used in the examples in this book.
• Chapter 4: Material Ledger Basic Configuration and Startup
  We go through the basic Material Ledger, actual costing, and actual cost component structure configurations. Then we initiate the Material Ledger startup and reconciliation programs.
• Chapter 5: Account Determination Configuration for the Material Ledger
  We examine all the Materials Management (MM) account determination that is necessary to run the Material Ledger. We also configure how to treat the exchange rate differences in our chocolate factory example.

1.1.2Part II: Basic Functions of the Material Ledger

In Part II, we show how the Material Ledger transaction data is created when a material-related transaction is performed in the system. We also cover the period-end closing activities for actual costing/Material Ledger and the main Material Ledger reports and display transactions.

• Chapter 6: Purchasing Processes and Variances
  We show you examples of how the external procurement processes (from purchase to payment) can influence the Material Ledger and actual costing through the price and exchange rate differences.
• Chapter 7: Manufacturing and Overhead Variances
  In this chapter, we discuss how the manufacturing process can influence the Material Ledger and actual costing. We see examples of production order variances and settlement to the Material Ledger during period-end closing activities.
• Chapter 8: Periodic Actual Costing
  We execute the Material Ledger actual costing run to calculate the periodic actual cost. For each step, we discuss the execution parameters, expected results, and the Material Ledger values.
• Chapter 9: Actual Costing Revaluations
  We discuss two other functions in the Material Ledger to revaluate at actual cost: the cost of goods sold (and other single-level consumptions) and the work in process (WIP) materials.
• Chapter 10: Actual Costs and Value Flow Reports
  We see the actual cost reports and display transactions in the Material Ledger (actual cost component split, valuated quantity structure, actual bill of material, and value flow monitor).
• Chapter 11: Material Ledger: More Functionalities
  We see more Material Ledger functionalities such as transferring actual cost to CO-PA, debiting or crediting directly to materials, changing actual cost component split values, distributing usage differences, and alternative valuation runs.

1.1.3Part III: Advanced Topics in the Material Ledger

Part III presents advanced Material Ledger functions. We discuss the parallel valuation/transfer prices, multiple valuation of cost of goods manufactured using the Material Ledger solution, actual costing cross-company code, and how to use SAP HANA for actual costing processes.

• Chapter 12: Transfer Prices and Multiple Valuation Approaches
  The multiple valuation approaches or transfer prices refer to using the Material Ledger to carry the group and/or profit center valuations in inventory in addition to the legal valuation.
• Chapter 13: IFRS and Multiple Valuation of Cost of Goods Manufactured
  We analyze a business function in SAP ERP 6.0 EHP 5 called parallel determination of costs of goods manufactured, which is used when you have more than one accounting principal to valuate inventory.
• Chapter 14: Actual Costing Cross-Company Code
  We discuss a business function in SAP ERP 6.0 EHP 5 that allows you to valuate the in-transit stock at actual cost and to calculate cross-company code actual costs.
• Chapter 15: Material Ledger on SAP HANA
  In this chapter, we discuss the impact that SAP HANA can have on the actual costing processes. We see the Material Ledger accelerators, data replication to HANA, closing procedures, and reporting.

1.1.4Appendices

Two appendices complement the Material Ledger overall functionality. Appendix A provides the accounting postings used in the examples through the T accounts. Appendix B provides a bibliography used in writing this book, which may also be useful for further reading.

1.2Looking Ahead

After reading this book, you will have a total and deep understanding of the Material Ledger concepts, configuration, calculations, reports, and advanced functionalities. You will understand the different scenarios of material valuation and be able to choose the best option to fit to your company’s requirements. You will know in detail how actual costs are calculated by the Material Ledger and how you can use the Material Ledger to value the inventory or accrue the differences for different accounts.

Using the examples shown in this book, you will be able to extrapolate the Material Ledger concepts presented here to your individual business cases. The book gives you a unique perspective on the Material Ledger functionality and will prepare you to be part of an actual costing/Material Ledger implementation.

Table of contents

• Dear Reader
• Notes on Usage
• Contents
•   Acknowledgments
• 1   Introduction
• Part I – Introduction to the Material Ledger
• 2   Material Ledger Basics
• 3   Product Cost Planning
• 4   Material Ledger Configuration and Startup
• 5   Account Determination Configuration for the Material Ledger
• Part II – Basic Functions of the Material Ledger
• 6   Purchasing Processes and Variances
• 7   Manufacturing and Overhead Variances
• 8   Periodic Actual Costing
• 9   Actual Costing Revaluations
• 10   Actual Costs and Value Flow Reports
• 11   Material Ledger: More Functionalities
• Part III – Advanced Topics in the Material Ledger
• 12   Transfer Prices and Multiple Valuation Approaches
• 13   Multiple Valuation of Cost of Goods Manufactured and IFRS
• 14   Actual Costing Cross-Company Code
• 15   Material Ledger on SAP HANA
• A   Examples in T Accounts
• B   Bibliography
• C   The Author
• Index
• Service Pages
• Legal Notes