Updating the Standard Price in the Material Master Record

Objective

After completing this lesson, you will be able to list the various price fields in the material master.

Lesson Overview

In this lesson, you explore the connection between settings for costing (costing variants) and different price fields, ensuring you can accurately determine and set product prices. You learn how to calculate the costs of products, then update these prices in the material master record and outline the impact on inventory valuation, for example.

Since a new product prototype is ready and production is about to start, it’s crucial to calculate and set a precise initial standard price. This process involves making the right valuation settings and using the correct quantity structure.

To achieve this, you need the following knowledge:

  • Identification of prices in the material master.
  • How to calculate a cost estimate.
  • How to update the standard price and related postings.

The lesson guides you through updating prices in the material master and using material costing functions with quantity structures, equipping you with the skills for effective product cost management.

Comprehending the Material Master Prices

Figure detailing the locations of various prices within the Material Master tabs, as detailed in the following text.

Comprehending Material Master Prices

When displaying the material master in the Display Material app, you find several prices:

  • Planned Prices 1, 2, and 3 (Costing 2 tab)

    Used for raw materials and purchased parts. Determines the material valuation in cost estimates.

  • Tax-based and Commercial Prices (Accounting 2 tab)

    Enter these for inventory costing of purchased parts to determine their values. Use these prices in inventory cost estimates to update the costing results for finished and semifinished products in the material master.

  • Price control (Accounting 1 tab)

    Indicator that controls which price to use for inventory valuation. Choose between Standard Price (S) or Moving Average Price (V). Apply these prices to valuate goods movements and inventories in SAP S/4HANA.

    Use a standard cost estimate to update the standard price. Access the results of standard cost estimates from the accounting and costing views, which then update the standard price.

Analyze the various cost estimates and record their results in the appropriate price fields in the material master, based on the costing purpose.

The costing type determines which price field you can update with the cost estimate results. You can update the price fields in the material master with the following results:

  • Standard cost estimate result as the Standard price.
  • Modified standard or current cost estimate result as Planned prices 1, 2, and 3.
  • Inventory cost estimate result as Commercial prices 1, 2, and 3 or tax-based prices 1, 2, and 3.

In your valuation strategy, you can refer to different prices in the material master so that you can use these prices in other cost estimates.

To update the standard price in the material master, mark and release a standard cost estimate. Next, learn how to calculate this cost estimate.

Calculating a Cost Estimate

To create a cost estimate using a quantity structure, you need a material master that includes costing and accounting views. These views provide the necessary elements for valuation within your organization. Then, specify the costing variant, material, and plant relevant to this context.

Use material cost estimates to determine the cost of goods manufactured and the cost of goods sold.

The material costing functionality allows you to calculate standard costs through the Manage Material Cost Estimate app. You can also use the Manage Costing Runs app to calculate the expenses for individual or multiple materials.

Figure outlining the steps for creating a material cost estimation as detailed hereafter.

To create and mark the standard price in the Manage Material Cost Estimates app, follow these steps:

  1. Select a Costing Variant: Select a costing variant for a standard cost estimate. It helps to specify the valuation rules, the purpose of costing, and the costing version. For example, if you create a new standard cost estimate in December 2025, set the validation period from January 1, 2026, to December 31, 9999.
  2. Choose Standard Costing Values: Identify the main factors such as lot size, dates, and quantity structure to select the appropriate quantity structure.
  3. Verify Costing Results: Review the costing results for errors the system might have missed, like incorrect prices or quantities. Ensure the quantity structure and content order are correct.
  4. Save the Material Cost Estimate: The estimate will not update in the database until you save it. The cost component split and itemization are saved to the database. You can save multiple cost estimates as needed.

Updating the Price in the Material Master

You can update the price in the material master in the following ways:

  • Setting the first price for a new material.
  • Updating the price for an existing material.

In both scenarios, follow the same steps. If you have items in stock, you may need to perform extra tasks.

Updating the Standard Price of a Cost Estimate

This video covers updating standard prices in cost estimates. You learn how to update a standard price from 10 to 15 for materials under S price control. The video guides you through the process of marking, releasing, and revaluating the materials, and shows you how the system calculates and updates inventory values.

Summary

This video covers updating the standard price in a previously released standard cost estimate from 10 to 15 for materials under S price control. You calculate inventory by multiplying the quantity (10) by the standard price (10), resulting in 100.

The video covers the three essential steps: Mark, Release, and Revaluate. First, mark the cost estimate for a specific context, such as Company Code, Fiscal Year, and Costing Variant, setting the planned price to 15 in the material master.

No revaluation happens at this stage. Next, releasing converts the future standard price of 15 to the current price, moving the previous price to history. Finally, if the material has inventory, the system revalues it with the new price, increasing the inventory value by 50 and posting a profit of 50 from the revaluation.

Update of Standard Price

Diagram outlining the steps for updating the standard price and how to execute different checks.

Update Standard Price: Mark & Release

The procedure for updating the standard price is as follows:

  1. Material Cost Estimate: If not already available, perform the material cost estimate.
  2. Verify Costing Results: The error status and look for errors like wrong prices or quantities. Ensure the accuracy of the quantity structure and content order since the system cannot detect these errors.
  3. Allow update: You can specify once per company code, plant, and material range. Decide whether to use marking for the fiscal year and period.
  4. Marking: After you have carried out steps 1 to 3, you can mark the material cost estimate. The future planned price is updated in the material master and linked to the standard cost estimate, but no revaluation occurs. You can mark multiple times the future standard for a material, but the system will warn you if a marked standard already exists.
  5. Releasing standard cost estimate: Release the cost estimate, which only happens once per period/costing variant/version. If released in error, delete the entry from the database. The release date must be the same or later than the "valid from" date of the cost estimate. Releasing occurs a day or two after marking to allow for analysis.

At each step of the process, check the new price using the Display Material app on the Costing 2 tab. The new price first appears in the Future column with the current period/fiscal year, and after marking, it will appear in the Current column.

Note

The mark and release process applies per valuation (for example for legal valuation). If using group valuation, the process occurs twice.

Impacts on Valuations and Analysis

You can update standard costs in the material master as the future or current standard price through a two-step process. First, create the cost estimates and use them for the future planned price. Then, update these prices in the material master and link them to the standard cost estimate.

Price control is crucial for material valuation. When price control is set to "S" (standard price), material inventory is valued at this standard price. Goods movements are also valued using the price indicated by the price control setting within SAP S/4HANA.

In Cost Object Controlling, the standard price from the cost estimate is used for costing. The itemization of standard cost estimates can be used to determine the target costs for manufacturing orders. You can analyze the difference between target cost and actual cost at the level of variance categories, such as quantity or price variances. The saved itemization forms the basis for these variance calculations.

In profitability analysis, standard cost estimates (or other material cost estimates) allow you to compare the revenues from billed quantities with the product's cost component split.

A standard price is also necessary in the material ledger to determine the actual price.

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