MAP and Standard Price

[Former Member]

Hi All,

Moving average price is just used for raw material.

Standard price is used for semi-finished goods and finished goods.

When there is a difference in moving average price, where it will settle?

This is because in the moving average price, the price of material always fluatuated, but when we set the standard price, the price of semi-finsihed and finished goods will become fixed.

So when the price difference in moving average price, where it will settle the price difference?

Best regards,

Chien Yee

[Former Member · Accepted solution]

hi,

You said that it will settle in variance account.

But start from which point?

Example like once their receive the goods or send the goods out?

Best regards,

Lucas

[Former Member · Accepted solution]

Settling to variance account will be done at the period end closing transaction.. when your prodcution order has a status of TECO( technically completed or DLV( delivered) , then system at the period end calcuate variance and at that time variances are settled and posted to FI

So after the receving the goods( i.e. after doing GR from production otherwise when u receive back the goods from production order to store) , the variance will be posted to FI

If help ful asign points

cheers

PK

Message was edited by:

Prabhat Kumar

[Former Member]

Hi

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.

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.

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

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

Assign points if this is useful.

Thanks

Vardhini

[Former Member]

Hi,

I think you misunderstand with my question.

Let's us start with whole production line.

We start at raw material, for raw material we will use moving average price. Then the price of raw material will always fluatuated. Then after that, we will have semi-finished and finsihed goods, but for semi-finished and finished goods, we will use standard price. Then the price for semi and finished goods will fixed at one cost for certain period.

When there is a difference in the process between MAP and standard price, where the cost will settle at? I mean where the difference cost will settle at?

Best regards,

Lucas

[Former Member]

If your raw material has MAP and it is diff when a PO is raised, GR is received and Invoice is received, it will update the inventory based on the price change. When costing is run, the semi and finished goods are costed based on the price of raw material on that day and will get updated. Any variances for Semi and finished will be settled to variance account.

Hope this explains. Assign points if helpful

[Former Member]

Hi Lucas,

Standard cost will update the price with CK11n (when you run standard cost)

In your case Raw material is on Material code adn Semi findished goods is different material code.

if you wnat to update standard price CK11N

for MAP it will update according to PRD and settle to P& L

Best Regards

Ashish Jain

[Former Member]

Check the below. MAP diff will update the stock difference.

http://www.sap-basis-abap.com/sapmm017.htm

Assign points if helpful

[Former Member]

Hi Lucas,

Good Morning

If it is moving average price it will add to inventroy

if it is standard cost The differnce will settle to P&L account and the transaction key would be PRD in OBYC t-code. If you want to settle those cost to inventory you can also do that.

Best Regards

Ashish Jain

Pls reward points if it is useful

Message was edited by:

Ashish Bohara