Material Ledger Q&A

Material Ledger

What precautions have to be taken while switching on the material

ledger for a plant?

A material ledger once activated for a plant cannot be switched off.

Therefore it is important that the material ledger be activated carefully

for a plant.

How do you go about configuring material ledger?

The following are the steps:-

1) Activate Valuation Areas for Material Ledger

2) Assign Currency Types to Material Ledger Type

3) Assign Material Ledger Types to Valuation Area

4) Maintain Number Ranges for Material Ledger Documents

5) Activate Actual costing (whether activity update relevant for price

determination)

6) Activate Actual cost component split

7) Customizing settings in OBYC

What are the problems faced when a material ledger is activated?

When a material ledger is activated it is imperative that actual costing

run has to be done every month. Actual costing run needs to be done

immediately after the new month roll over. After the actual costing run

you cannot post any MM(Materials Management) entry to the previous

period.

What are the options available while performing revaluation in an

actual costing run?

There are 2 options available:-

Revaluation – You can revalue the finished goods stock

Accrual – You can accrue the revaluation gain or loss without actually

changing the price in the material master.

What is the configuration setting to be done for posting the accrual

in the actual costing run?

In transaction code OBYC select transaction key LKW and maintain the

balance sheet account for accrual.

What are the steps to be taken before you execute an actual costing

run?

The following are the steps to be taken:

1.) Execute all the allocation cycles in the cost center

accounting module.

2.) Execute actual activity price calculation.

3.) Revalue all the production orders with the actual activity

prices. The under or over absorbed cost on cost centers are

passed on to the production order through this step of

revaluation of production orders.

4.) Calculate overheads, do a variance calculation and finally

settle the production order.

5.) Finally execute the actual costing run.

What happens in an actual costing run?

In actual costing run there is a process of single level price determination

and multi level price determination. The production price difference

variances are collected on the material ledger for each of the finished

goods and semi finished goods.

During single level price determination the price difference collected on a

single finished product is allocated to consumption. This allocation to the

consumption is not individually allocated to the good issues.

In multi level price determination the price difference is allocated to

individual goods issue. The price differences are passed on to the next

level of consumption.

The system calculates a weighted average price for the finished goods

and semi finished goods. This weighted average price is called as the

periodic unit price

What happens when the revaluation is done in actual costing run for

the previous period?

When revaluation is performed in actual costing for the previous period

the price control in the material master is changed from S to V and the

periodic price is updated as the valuation price for the previous period.

What is the importance of the price determination indicator in the

material master for the purpose of actual costing run?

There are 2 price determination indicators in the material master when

material ledger is activated.

They are as follows:-

2 – transaction based

3 – Single level / multi level

In case of material masters having price determination indicator 2 no

actual costing will take place. In case of material masters having price

determination indicator 3 actual costing will take place.

What should be the price control for a material master which has a

price determination indicator 3 where material ledger is activated?

In such a case only price control S is possible where the price

determination 3 is activated in material master.