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Overheads(cogm and cogs) diff impact on material consumption in financials


Our Material consumption contains

1)Issues to production-Debit

2)COGM                    -Credit

3)COGS                    -Debit

Suppose each Material Cost is Rs.50/- and 3 items has been issued.

Material consumption a/c dr     150     -p&l

Inventory a/c                    cr      150     b/s

(Being 3 qty issued to production order)

Once the goods is produced

Inventory FG                    dr          180     b/s    

COGM                              cr          180     p&l

(3 qty of FG is produced and contains 30 Rs value addition which is rs.10/- overheads per each)

When the goods is sold for 2 qty

COGS                              Dr     120     p&l

Inventory FG                    CR     120    b/s

(2 Qty sold out of the 3 qty produced)

Now the Material consumption a/c will be

Material consumption against sales -COGM+COGS=90 (150-180+120) which is supposed to be Rs.100(50 Unit Rm cost*2 qty sold)

Former Member
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