Material Ledger Function in SAP S4 Hana

Material Ledger Function in SAP S4 Hana

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Material Ledger is a tool that collects transaction data for materials whose master data is stored in material master. The material ledger uses this data to calculate prices to valuate these materials. The material ledger is the basis of actual costing.

Material ledger accounting refers to the ability to generate financial transactions at a material level, providing granular detail of inventory movement.

Material ledger (ML):?Provides following main features

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1.??????? Multiple currency: Traditionally inventory is mainly valuated with a single currency in SAP ERP. ML allows valuation in two additional currencies. Today’s global organizations operating in different countries desire to valuate inventory in multiple currencies.

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2.??????? Multiple valuations: ML offers the option of three different levels of valuations (Legal ,group and Profit center) for a corporate group operating in multiple countries . Generally legal valuations are stored in local currency, group & profit center valuations are stored in group currency (mostly in USD). Parallel valuations support transfer pricing for internal sales between legal entities or profit centers within the group for worldwide supply chain.

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3.??????? Generates financial transactions: Provides detailed information about inventory movement

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4.??????? Actual costing: Inventory and material movements are generally valuated either at Standard price (S) which is constant over a period of time or Moving average price (MAP) which gets adjusted (calculated) automatically based on every Goods receipt or Invoice receipt. Both of these two methods have their own pros and cons. Actual costing combines the advantages of standard price with advantages of using MAP.

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Actual costing is an optional feature that can be activated as part of the Material Ledger to revalue materials at their actual cost as part of period-end close. It is important to understand that actual costing is an element of the Material Ledger but requires additional transaction processing to calculate and revalue inventory based on actual costs.

?Actual Costing Runs

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The actual costing cockpit provides a way to perform the various steps included in actual costing runs. These steps include production and process order closure, overhead cost calculation, allocations, actual cost split, actual activity rate calculation, and actual costing.

T-Code for Actual costing execution into SAP S4 Hana:

1.??????? CKMLCP - Cockpit Actual Costing

2.??????? CKMVFM - Value Flow Monitor – just validation check whether all variances have been allocated or showing as non-allocated to material level.

3.??????? CKMLCPAVR - Alternative Valuation Run Cockpit

The sequence of steps in the Material Ledger actual costing cockpit are as follows:

·??????? Selection

·??????? Preparation

·??????? Settlement

·??????? Post Closing

·??????? Mark Prices

Multiple currencies and valuation overview

SAP Material Ledger is the multiple currency valuation. A total of three currencies and two valuation views are possible:

·??????? Local currency (legal valuation in the currency of company code)

·??????? Group valuation (corporate group valuation for reporting purposes)

·??????? Profit center (profit center valuation, for transfer pricing functionality, for example)

Moving Average Price/Periodic Unit Price

·??????? The moving average price is the price that changes as a result of goods movements and the entry of invoices, and which is used to valuate a material.

·??????? The periodic unit price is the price that changes within a period as a result of goods movements and invoice entries. If you have the material ledger active you can use this price to valuate a material after the closing entry at the period end.

Actual costing with SAP Material Ledger is done in three steps:

·??????? Preliminary valuation at standard cost and recording of price differences

·??????? Price determination: calculation of periodic unit price (PUP) for single and multilevel products

·??????? Revaluation of inventory with periodic unit price (PUP)

Actual Cost Component Split (CCS)

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The actual cost component split groups the actual costs into buckets across multiple manufacturing levels, providing the company with a view of the major relevant elements of the total cost, such as labor costs, raw material costs, freight costs, etc. SAP Material Ledger uses the same standard cost component structure for the cost component split at actual cost.

Having this information available for each product and plant combination enables the company to do important cost analysis more effectively by comparing actuals to standard costs, as well as understanding the breakdown of their costs with the functions provided by SAP Material Ledger.

Since actual costing information is updated at the level of the procurement alternatives and procurement processes, it's also possible to compare different sources of supply for analysis of the actual costs.

The actual cost component split that is available for the cost of goods manufactured can also be transferred to the controlling sub-module, profitability analysis.

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ML captures all price variances (like purchase price variances, production variances etc) and allows (as optional period end activity) revaluation of ending inventories at period end and releases it as standard price (generally) for next period.