Valuation Variant: Material Costing in Work Order

[former_member200343]

Hello All,

In the Valuation Variant config, for material, we have options like:

• standard price
• moving average price
• price according to price control indicator in MM.

Now when I set the valuation variant as standard price and in the material master I have indicator as V.

So the price in Work order is calculated by moving average only.

Similarly, if I set variant as moving average price and in material master its S, so the price in WO is calculated as standard only.

So my doubt is what is the use of setting in valuation variant.

Thanks in advance.

Piyush

[former_member200343]

Hello all,

My doubt is still not answered.

Step1: Valuation variant for material with Standard price.

So now during costing, std price of material is expected to be taken in WO.

Step 2: Material master with price control indicator as V and moving average price as 100 and std price as 3.

Step 3: GI of above material to a WO:

Cost of material in WO is 100, which is the moving average price of material.

So the price in WO is determined according to price control indicator in Material master, and not according to settings in valuation variant.

So what is the use of having valuation variant settings then !!!!

Thanks,

Piyush

[sunil_mundhe3]

Standard vs Moving Average Price

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.

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.

[pardhreddyc]

Dear,

The main purpose of valuation categories in Maintenance Order is to have planned cost and actual cost calculation.

In maintenance department , they would like to see the maintenance cost bifurcation with respect to Material cost, Internal service cost and External service cost.

This helps them to have budget planning for next financial year for material procurement and service planning activities.

In valuation categories you are doing settings to pull the cost on to work order.and assigning the cost elements to it.So this primary cost elements of CO  are G/Ls in finance.So you need to link the path to calculate the cost.

Regards,

Pardhu

[former_member186385]

Hi Piyush,,

In the valuation variant, if you set Standard Price, system will look for the material master with S price control  indicator and fetch the value into the Work order

If you set Moving average price, system will look for the material master with V price control indicator and fetch the value into the work order

valuation variant will try to fetch the value from material master based on the Price control ( either S or V )

thanks

santosh

[MTerence]

Hi Piyush,

In valuation variant, you can set multiple strategies to determine the cost of the material. System picks the price based on the priority is set in the strategy.

As per your example, if this is the priority i have maintained

• standard price
• moving average price
• price according to price control indicator in MM.

System first checks whether the standard price is available, if so it will maintain it.

If the standard price is not available, system will check if moving average price is available, if yes it will maintain it.

If Standard price and moving average price not available, it will go for third option.

If you dont maintain valuation variant, your order cost will not be calculated. Since this valuation variant is assigned to costing variant and it is assigned to work order type.

Regards

Terence