Now, you must identify the differences between various situations in product cost accounting based on the organizational unit. Identify different production and valuation methods based on the specific plant and company. Then, you will locate the specific fields in the material master data that ensure a particular costing method for a material cost estimate.
Identifying and Integrating Material Master Data in Product Cost Planning
Objective
After completing this lesson, you will be able to explain the role of material master data in Product Cost Planning
Lesson Overview
Material Master Data
The material master record centralizes all the necessary details to manage materials. It also evaluates production costs based on production settings. This information is handled per organizational unit. Ensure to use different methods for different valuation areas (like plant or company). For example, the way a bike is made and the cost of its parts might differ in your group's countries.
The material valuation area is an organizational unit in Logistics for evaluating material values. It is usually directly linked to a plant, so cost estimates are unique to each plant.
Different valuation prices and values can be maintained using this system. Material stocks can be evaluated at either the plant or company code level. Material cost estimates are stored per plant. A product produced in different plants will have a separate cost estimate for each plant. However, the same cost estimate can be used across all plants.
SAP S/4HANA uses the costing results to value material movements in logistics. The valuation area defines the organizational level at which the material's value is determined.
Organizational Structures for Material Cost Estimates
For cost estimation purposes in material master data, define the following:
- Production information (if applicable).
- Production Planning master data (BOM, Routing).
- Accounting information: Here, you define the type of valuation and assignment to a G/L account (stock movement, and so on).
- Costing information: Here, you define the group assignment for overhead calculation, inclusion or exclusion for variances calculation and the use of normal or unit costing.
- Status information on price: Here, you define the price control, to determine the standard or moving average price valuation.
In this business example, consider one plant for one company.
Role of Material Master Data in Product Cost Planning
The information stored in the master data affects how products are valued in Product Cost Planning. Material costs are calculated by multiplying the price from the material master record by the input quantity from the BOM.
In SAP S/4HANA, the valuation of materials (such as raw materials, semifinished products, and finished products) depends on the pricing control set in the material master. There are two valuation methods: moving average price and standard price.
Moving average price (V) represents the average value of the total inventory and quantity of material in stock, and the price changes after each receipt to reflect the average value.
Standard price (S) remains constant for a certain period of time and is typically based on a standard cost estimate for the material.
The moving average price reflects the current delivered price, while the standard price is based on planned values rather than actual prices. Differences between planned and actual prices are recorded separately on a price difference account and are not applied to the material stock in Financial Accounting. When you use moving average price, the material stock must reflect the actual prices of the material.
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