SAP Software Knowledge: Price Control V or S in material type

Saturday, May 2, 2009

Price Control V or S in material type

Standard price are used for products that do not fluctuated frequently. It is usually used for finished or semi finished products.

Moving average price are used mainly for raw materials that are purchased externally. The advantage of using moving average price for your raw materials is that your inventory costs will always reflect the current market cost.

SAP strongly recommends that you do not select price control V for semi-finished products and finished products, because doing so will very easily cause the calculation of unrealistic valuation prices. SAP recommends:
Price control V for raw materials and trading goods; price control S for semi-finished products and products.

If you nevertheless select price control V, take care in the following situations:

1. Unrealistic prices occur if materials are produced and also retire during one period (that is, the inventory at the end of the period is smaller than the total of aquisitions from production orders) and if, in addition, several production orders belonging to a material were finished in this period, and the production order settlement calculates variances at the end of the period. Every single production order carries out an inventory coverage check and may therefore cause the moving average price to be changed. However, the individual production orders do not check whether the inventory available at the end of the period has already been debited by another production order.

Example: on 20 workdays in the period, 1 piece of material xyz was produced for each day and delivered to the warehouse at a price of USD 1000. At the end of the period there is 1 piece at the warehouse. Since an activity price of a participating cost center was higher than planned , every single production order calculates cost of goods manufactured of USD 1100 during the settlement. Every single one carries out a inventory coverage check and finds out that the variance can be posted completely to the inventory. That is, the ending inventory of one piece is debited with USD 20 x 100 and it consequently receives a price of USD 3000.

1. A settlement is carried out although not all costs have yet been posted to the order. This can even result in a price of 0 for the delivered product.
2. No period check of the costs is carried out on the order, that is, costs from previous periods may be settled.
3. Settling orders is already possible in the 'Delivery completed' status.

Solution: Standard price for products together with possible manual price changes.
If you are required to valuate semi-finished and finished products with actual prices that correspond to the costs of the actual production, SAP recommends you use the function of the material ledger for this. Here, a periodic actual price is created that is calculated on a much more reliable basis than the moving average price. A so-called price limiter quantity is used which makes sure that in the above example price differences are proportionally taken into account (95% of the total price differences) when valuating the 19 pieces withdrawn from material xyz which results in a periodic actual price of 1100 USD. In addition, it is possible as of Release 4.5 to even take into account the variances of the actual prices of the raw materials in the valuation of the semi-finished and finished products that are manufactured from it.

If we select std price for any type of material or mav and then make po, it will pick from material master or what?