Analyzing Material Master Data from a Controlling Perspective

In this lesson, we cover cost estimates and their different types. We must understand their final use, the decisions they support, and the information they provide to the operational team in production. We explore their impact on the standard price of a material. We also define standard prices, focusing on cost estimates with quantity structure.

The Material Master is a critical component of SAP S/4HANA, containing information on materials a company procures, produces, stores, and sells.

The type of material determines its attributes and characteristics, whether it is a raw material, a semi-finished product, or a finished product.

The Material Master is split into several views, each representing different aspects of a material. Each view contains specific data related to work areas like sales, purchasing, materials requirements planning (MRP), accounting and costing.

The Material Master is split into two main areas of validity: global and plant-specific. Global data is valid for all company codes and plants, while plant-specific data is only valid for a particular plant.

For Product Cost Controlling, note the following views:

• The Basic 1 view contains material descriptions, material groups, base units of measure, and other data.
• Accounting 1 and 2: These views contain accounting data for the material, like valuation class, price control, and moving price. These settings are essential for financial accounting and valuation of the material.
• Costing 1 and 2: These views contain costing data for the material. They include details like lot size, method, and material origin, which is crucial for determining the cost of the product.

While these views are of primary importance, the MRP views also play a significant role in Product Cost Controlling. However, this will be discussed in a later course.

The material type determines whether a costing view is allowed for a material. It specifies default values set in the material master.

Use the costing lot size entered in the material master as the default value for material cost estimate generation. You can overwrite the lot size during individual processing.

The valuation class controls account determination. In the Itemization section, you can select which consumption account to use as the primary cost element.

Theoretically, the origin group can be a subgroup of a cost element. When you select an origin group for a material, the origin group and cost element define the overhead for specific material groups, such as input material groups and the cost components for specific raw material groups.

The overhead group is where you can group materials manufactured for the same type of overhead application.

If you select the No Costing field or set the material status to Inactive, the system excludes the material from executing a cost estimate.

Planned Prices 1, 2, and 3: Use Planned Prices 1, 2, and 3 for reporting and material valuation in cost estimates. Enter the planned prices manually or determine them using a material cost estimate. If you use cost estimate determination, the prices update in the material master using the Price Update function.

Tax-based and commercial prices: Enter tax-based and commercial prices manually or using the Price Update function from material cost estimates. An inventory cost estimate uses these prices for valuation and updates the costing results in the tax-based and commercial prices fields of the material master of the produced material.

Price control: The price control indicator specifies the price for material inventory valuation. The available options are standard price and moving average price.

The valuation of materials (raw materials, semi-finished products, and finished products) depends on the price control set for the respective materials in the material master.

The valuation strategies are as follows:

• With moving average price control (V), a new material price is calculated after each receipt. The price is an average value calculated from the total inventory value and the total quantity of material in stock.
• If the goods movement is valuated at the standard price (S), the price remains constant for at least one period. The standard price is typically the result of a standard cost estimate for the material but it can also be updated manually.

The main difference between both valuation procedures is that the moving average price (V) represents the current delivered price and the standard price (S) is based on the planned values and not the actual prices. However when performing actual costing, a periodic standard price can be calculated using actual prices.

Differences between the planned price and the actual price are not assigned to the material stock in Financial Accounting (FI), but are collected on a price difference account. When you use the moving average price (V), the material stock in FI should reflect the actual prices of a material.