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Actual Costing is a highly sophisticated and integrated controlling concept. For a successful
implementation project it is of essential importance to understand the impact of this function.
This page is to give you answers to the most frequently asked questions.
A. After the multi-level price determination, a line "not distributed" appears in the material
price analysis: price differences are not taken into account for the price determination and are
not distributed to consumption or ending inventory.
Here's the explanation why this is correct and how you can avoid it.
A. After multi-level price determination, a line "not distributed" appears in the material
price analysis. Read here why and how this is happens:
The Material Price Analysis shows a "Not Distributed" line - what is that?
Posting Examples
External Procurement
Internal Production
Background, Helpful Information
Workarounds
The Material Price Analysis shows a "Not Distributed" line - what is that?
Actual Costing follows various rules, among which are the following two:
Only costs that are covered by the inventory are assigned to the material.
Costs that are not covered by the inventory remain as price differences.
If in a period values are posted for a quantity larger than the cumulative quantity, only a
portion of the values is distributed to material. The portion that is not distributed to material
is displayed in the Material Price Analysis in the line "Not Distributed" (Figure 1). This
ensures that the price determination considers only values that belong to the period's
cumulated quantity (stock coverage).
Internally, the calculation of the Not Distributed line is controlled with a price limiter
quantity.
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FAQ’S on Actual Costing & Materials Ledger
Figure 1
Posting Examples
The Not Distributed line occurs in a number of situations. The two examples below explain
the concept of and the need for it.
External Procurement
During price determination, Material Ledger finds that the price limiter quantity exceeds the
cumulative quantity of that period (100pc). It prorates the values posted with Debit/Credit
Material: Two thirds of the value are not covered by stock and thus are categorized as "not
to be distributed". You can see this value in the line Not Distributed.
In-house Production
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FAQ’S on Actual Costing & Materials Ledger
If the whole amount of price differences would be considered for the price determination,
incorrect values would be incorporated into the price.
Similar postings occur with external procurement, when materials are received and used up
in one period, but invoiced in a second.
Other examples for the Not Distributed line can be found in Note 323719
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The price limiter is build up by transactions which post only values (no quantities), such
as
Order Settlement.
Invoice Verification.
Debit/Credit Material.
Not Distributed values are calculated during single-level price determination
The Not Distributed line is located above the "Cumulative Inventory", and contains only
price/exchange rate differences.
The line is not the same as the Not Allocated line, which is located in the category
"Consumption" below the Cumulative Inventory.
As with all other data above the Cumulated Inventory, Not Distributed values effect the
price determination.
After Period End Postings, the Not Distributed values remain on the price difference
accounts; they are not distributed neither to ending inventory, nor to consumption.
You can not correct the not distributed value with a correction posting with debit/credit
material, as this correction posting would again build up the price limiter.
Workarounds
The calculation of the Not Distributed line is not a bug: it is essential for the correct
calculation of the Periodic Unit Price of a material.
However, in some situations you might want to control or correct the Not Distributed values.
To do that, you have the following possibilities:
With external procurement, use the Logistic Invoice Verification / document type
subsequent debit instead of the transaction Debit/Credit Material. The Logistic Invoice
Verification does not alter the price limiter quantity to a value higher than the invoice
value.
If you use the transaction Debit/Credit Material, enter a quantity of zero manually.
Note 335670 will change the default value from current quantity to zero.
If for you are in a repetitive manufacturing scenario and use periodic settlement (instead
of full settlement) price differences are posted to material in each period, and to a certain
degree you avoid the situation described above.
If you have Not Distributed values and want to analyze how they are calculated, you can
apply Note 324754. This note describes a report which lists all documents that effect the
calculation of the price limiter quantity of a material.
If you find that the price limiter should be modified to include or exclude further values,
you can apply the report described in Note 325406.
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Note 207189 describes the +/- sign of the Not distributed values.
You want to change the valuation class of a material. If you use Actual Costing, if
you to carefully choose the correct movement types, adjust the update structure of
Material Ledger and choose the right point in time.
In order to change the valuation class of a material, the inventory quantity has to be zero;
goods movements to achieve this must not influence the price determination at period
end. The following illustrations demonstrate the problem and solution.
Figure 1 shows the periodic activities: A goods receipt causes price differences of 1,000
USD, resulting in a periodic unit price of 11.00 USD.
Multi-level price determination distributes the price differences to the ending inventory
(400 USD) and to consumption to production (600 USD).
Material Demo CD
Preliminary valuation price 10 USD
Preliminary
Quantity Price Differences Price
Value
Beginning Inventory 0pc
Receipts 1,000pc 10,000 1,000 11.00
Purchase 1,000pc 10,000 1,000 11.00
Cumulative Inventory 1,000pc 10,000 1,000 11.00
Consumption 600pc 6,000 600 11.00
Production 600pc 6,000 600 11.00
Ending Inventory 400pc 4,000 400 11.00
Figure 1: Price Analysis after Multi-Level Price Determination
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FAQ’S on Actual Costing & Materials Ledger
Figure 2 shows the use of a unspecified goods issue to zero the stock and the subsequent
goods receipt to build it up again: The cumulative quantity is 2,000 pc, and price differences
remain untouched - resulting in a periodic unit price of 10,50 USD.
This Periodic Unit Price is now the base of the distribution of the price differences:
the goods issue used to zero the stock is a single-level consumption and will not be
revaluated - 500 USD remain undistributed (on the price difference account).
the values distributed to consumption (production) and to ending inventory are wrong.
Material Demo CD
Preliminary valuation price 10 USD
Preliminary
Quantity Price Differences Price
Value
Beginning Inventory 0pc
Receipts 2,000pc 20,000 1,000 10.50
Purchase 1,000pc 10,000 1,000 11.00
Procurement 1,000pc 10,000 10.00
Cumulative Inventory 2,000pc 20,000 1,000 10.50
Consumption 1,600pc 16,000 800 10.50
not distributed 500
Consumption 1,000pc 10,000 10.50
Production 600pc 6,000 300 10.50
Ending Inventory 400pc 4,000 200 10.50
Figure 2: Price Analysis after Multi-Level Price Determination and GR´s + GI´s without adjustment to update-structure
To prevent this problem, you can adjust the update structure of Material Ledger and
thereby control that specific single-level consumptions appear in the category “other
receipts/consumption”. This category is located above the line Cumulative Inventory, so
that goods issue and goods receipt that are required for the change of the valuation class
even each other out and therefore do not effect the price determination (Figure 3).
Material Demo CD
Preliminary valuation price 10 USD
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FAQ’S on Actual Costing & Materials Ledger
Preliminary
Quantity Price Differences Price
Value
Beginning Inventory 0pc
Receipts 2,000pc 20,000 1,000 10.50
Purchase 1,000pc 10,000 1,000 11.00
Procurement 1,000pc 10,000 10.00
Other Receipts/Cons -1,000pc -10,000 10.00
Consumption -1,000pc -10,000 10.00
Cumulative Inventory 1,000pc 10,000 1,000 11.00
Consumption 600pc 6,000 600 11.00
Production 600pc 6,000 600 11.00
Ending Inventory 400pc 4,000 400 11.00
Figure 3: Price Analysis after Multi-Level Actual Costing; Goods Issue with adjustment of update structure
Steps in Customizing
1. *Copy the desired movement type (single-level consumption).
Example: copy movement type 201 (consumption to cost center) to movement
type 901.
2. Define a Movement Type Group
Example: create movement type group “01” and name it ”Valuation Class”.
3. Assign the desired movement type to the movement type group.
Example: assign movement type 901 to movement type group “01”.
4. Maintain the update-structure which you use for actual costing.
Example: maintain update-structure 0001 with the following entry
5.
Movement Type
Process Category Category Description
Group
VK
VP
Cons. to Cost 01 Valuation Class
Other Receipts/Cons.
Center
6. **Create a user-defined name for consumptions.
Example:
7.
Controlling Level User-Defined Name Text
0009 Cons/ValClas Consumption / ValClasses
8. **Assign user-define names for consumptions.
Example:
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FAQ’S on Actual Costing & Materials Ledger
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Period end closings for period 0 are carried out; after that, material related postings can only
be realized for period 1 (1).
Before any changes to valuation classes are realized, normal
periodic goods receipts are entered; they debit the stock and
the price difference account (2).
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Remarks
The valuation class of a material is period depended. This is relevant if the valuation class
is changed after period shift and before closing entries:
If during closing entries of actual costing the valuation class in the previous period differs
from the valuation class in the current period, the revaluation of the previous period and
the correction posting of the current period will be realized on different accounts.
Apply Notes 0362411 (Valuation Classes and Material Ledger) and 0160970
(Purchase/Production Orders), and check the OSS for others.
Actual Costing only works for materials for which single-/multi-level price
determination is set (key "3") - and consequently are standard price controlled. Is it
reasonable to choose transaction based price determination and moving average
price control for raw materials?
It is a prerequisite that for materials, for which actual price shall be determined, the
price determination key is set to "single-/multi-level" ("3", in material master). For all
these materials, the price control has to be set to standard price.
Before using Actual Costing, many companies have chosen the moving average
price as price control for raw materials. These companies now raise the question
whether they have to change the price control for raw materials when Actual Costing
is implemented.
This page gives you some background information to internally discuss the
questions. The list of arguments is not complete, and some arguments might not be
true for your business.
Technical Background
During the flow step "Selection" in a costing run, all materials with price
determination "3" are selected for single- and multi-level price determination; all
other materials are disregarded. Thus, if you accepted to apply Actual Costing only
for semifinished and finished materials, it is no problem to use the moving average
price (and transaction based price determination) for raw materials. However, you
should take into account various business aspects if you decide to do so.
Business Aspects
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It is for business and controlling reasons why for raw materials single-/multi-level
price determination should be used, the following statements will make this
reasonable.
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• With standard price controlled materials, external factors like price fluctuations do
not obnubilate internal processes; areas of responsibilities like procurement and
production are separeted more clearly: Price differences of materials are not
shown on cost objects but rolled up directly to the next material level.
• With the possibility apply actual activity prices directly in Material Ledger
instead of revaluating cost objects, differences from cost center accounting are
also passed on directly to materials instead of obnubilating cost object´s
performances.
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Recommendation
A. No matter if you want to change standard prices frequently or just once a year:
Actual Costing sets some restrictions to when this can be done.
Restrictions
New objects
The material is was created in this period. No postings have been realized.
Period opened
By opening a new period in Materials Management, Material ledger master data was
created for the posting period.
Price change completed
The valuation price of the material was changed in this period.
With any other period status, it is not possible to release a new standard price.
All valuation relevant postings (e.g. goods movements, order settlements, material
ledger closing of the previous period) change the period status so that a price
release is not possible.
If you want to release a new standard price, you should do so immediately after a
period shift; at this point in time, the status of all materials is "period opened", and a
price release is possible.
To prevent that postings are realized before the new prices are released, you can
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FAQ’S on Actual Costing & Materials Ledger
activate the dynamic price release. The system will then automatically release a
new price with any valuation relevant transaction (i.e. goods movement, order
settlement, or invoice verification).
Note that if a material is not touched during the whole period, the future price will not
be released unless you manually do so; hence, the dynamic price release is no
substitution for the traditional price release!
Also note that if dynamic price release is activated, and the period status of a
material does not allow the price release, the posting that triggers the dynamic price
release will give out an error message. This case can occur when you mark future
prices with a validation date in the middle of a month.
If you want to use the periodic unit price as a new standard price, you can typically
do so only with the delay of one period:
Normally, period end activities for a period are carried out after postings are realized
for the next period. In this case, the period status of the materials does not allow the
immediate release of a new price; the periodic unit price can only be released for the
period next but one. The following illustration explains this scenario:
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The above mentioned restrictions apply for all materials with single-/multi-level price
determination ("3"); for materials with transaction based price determination ("2"),
the traditional rules for price releases are valid.
Please note that you must not under any circumstances switch the price
determination key from "3" to "2", release a future price, and then change the price
determination key back to "3"!
Actual Costing for that period will result in wrong results, as required data is lost
during the changes; further, the material price analysis of Material Ledger will not
display the correct / complete data. You can not repair or recreate the damaged
data and will miss a whole period of Actual Costing.
The way Work in Process (WIP) is determined does not change when you activate
Actual Costing - but you should know about some issues!
If you are using Actual Costing and want to calculate WIP, you apply the standard
functionalities; there is no special way or procedure for the combination of Actual
Costing and WIP.
For determining the most accurate WIP value, we recommend to calculate WIP
periodically at target costs. In that case, the accuracy of the target cost calculation
depends on the degree to which the cost estimate (bill of material, routing) reflects
the actual costs, as the most recent cost estimate is used for the calculation.
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When Actual Costing is used and WIP occurs, the rolling up of price and exchange
rate differences may under certain circumstances lead to unexpected results. Two
different scenarios are to be distinguished:
Bill of Material
For the production of 100 pieces of a
finished material, 100 pieces of a raw
material are required (Figure 1).
Production
At period end, the production order is not
completed: Though 100 pieces of the raw
material are taken from stock, only 90
pieces are produced. 10 pieces of the
raw material are still on the production
line (WIP) (Figure 2).
Fig1 Fig2
During the period, the Material Ledger collects variances for the raw material ∆
between its planned and its actual price. At the end of the period, these variances are
rolled up to the finished products.
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Expected Postings
The roll-up one would expect would
assign price differences both to the
finished material and WIP. This
assignment is expected in the ratio in
which the raw material is used up for the
delivered goods and is still on the
production line (Figure 3).
Actual Postings
However, during the period, Material
Ledger is updated based on goods
movements from the point of view of
materials. It interprets that the whole
quantity of issued raw materials (100
pieces) was used for the production of the
delivered goods (90 pieces). As a result,
the price differences from 100 pieces raw Fig3 Fig4
Bill of Material
For the production of 100 pieces of a
finished material, 100 pieces of a raw
material are required. (Figure 5).
Production
At period end, no goods are delivered to
stock. The whole quantity of issued raw
materials (100 pieces) is WIP (Figure 6).
Fig5 Fig6
During the period, the Material Ledger collects variances ∆ for the raw material
between its planned and its actual price. At the end of the period, these variances are
rolled up to the finished products.
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FAQ’S on Actual Costing & Materials Ledger
Expected Postings
The roll-up one would expect would
assign price differences which belong to
the issued raw materials to WIP (Figure
7).
Actual Postings
However, Actual Costing can only
revaluate multi-level consumption, which
in this example does not exist: though the
process has input material, no output
material is produced.
As a result, the price differences from 100
pieces raw materials remain on the price
difference account (Figure 8).
Fig7 Fig8
Recommendation.
Material Ledger was first available with Sap's Standard Release R/3 4.0. Since then,
new functionality was added with each release, culminating in the Actual Cost
Component Split in Release 4.6c. Get the details.
Material Ledger was first available with Sap's Standard Release R/3 4.0. Since then, new
functionality was added with each release, culminating in the Actual Cost Component Split in
Release 4.6c.
Release 4.0
Release 4.5
Development News
Multi-Level actual costing allows roll-up of variances.
Single-level calculations for valuated sales order and project stock.
Brazil only: Material-Ledger plus specific report replace CUSTOS.
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FAQ’S on Actual Costing & Materials Ledger
Release 4.6b
Development News
Iterative calculation of cycle processes.
Materials can be revaluated with actual activity prices during multi-level price
determination.
Full multi-level functionality for sales order stock and project stock.
Release 4.6c
Development News
Actual cost component split.
Integration with CO-PA.
Logistic invoice verification closes gaps to old invoice verification
Revaluation of single-level consumption (e.g. to cost center, sales order, cost object
hierarchy) is not possible.
Revaluation of WIP with actual material prices is not possible.
No actual costing for active ingredient materials available.
Material Ledger can not be activated in Retail Systems.
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