Actual Costing

With

Material Ledger
The Basics

Actual Costing with Material Ledger

Motivations for usage of Material Ledger

How does it work?

Handling

What do we get?

SAP AG 2002, Actual Costing / Material Ledger 2

Actual Costing with Material Ledger

Reasons for Using Material Ledger

How does it work?

Handling

What do we get?

SAP AG 2002, Actual Costing / Material Ledger 3

Reasons for Usage of Material Ledger

Actual Costing

Transparency

Multi- level
MultiPeriodic Material Prices

of Value Chain

Material
Ledger
Inventory Valuation

Parallel Currencies

Parallel Valuation

Valuation with Historic

Exchange Rates

Transfer prices

Group

SAP AG 2002, Actual Costing / Material Ledger 4

Legal Profit Center

Benefits of Material Ledger

Periodic Unit
Price

Actual Price
Cost
Component Split

Actual Costs on
Balance
Accounts

Material
Ledger

Actual Values in
PA

Transparency
of Value Chain

SAP AG 2002, Actual Costing / Material Ledger 5

Actual Costing with Material Ledger

Motivations for usage of Material Ledger

How does it work?

Handling

What do we get?

SAP AG 2002, Actual Costing / Material Ledger 6

During the Period ...

Collection of Values
l Material Movements
l Purchasing
l Invoices
l Production order settlements
l Debits/Credit
Price
s are
froze
n

Building the Quantity Structure

l Goods Issue to Production
l Activities to Production
l Goods receipt from Production
l Material Transfers

SAP AG 2002, Actual Costing / Material Ledger 7

Period End: Single-Level Differences

Production

Production

Production
Variances

Price
Differences
from
Procurement

External Procurement
External Procurement

SAP AG 2002, Actual Costing / Material Ledger 8

Multilevel Price Determination

Roll--up price differences
Roll
Production

from raw materials to

finished materials

Production

External Procurement

External Procurement

SAP AG 2002, Actual Costing / Material Ledger 9

Activity Prices
Actual Activity Prices

can be picked up from

production cost centers

Production step 2

Production step 1

External Procurement

External Procurement

SAP AG 2002, Actual Costing / Material Ledger 10

Actual Cost Component Split

Production

Profit
ability
Analy
sis

Overhead
Process
Labor
Material

Production

External Procurement

External Procurement

Overhead
Process
Labor
Material

SAP AG 2002, Actual Costing / Material Ledger 11

Actual Costing vs. Product Cost Planning

Product Cost
Planning

Actual Costing

Master Data

Material Movements

99, Routing

BOM

Plan
Prices

Cost Estimate

Preliminary
Price

Standard Price
with
MaterialProcess Labor

Actual Quantity
Structure

Price Determination
Periodic Unit Price
with

OH

MaterialProcess Labor

Cost Component Split

Price
Differences

OH

Actual Cost Component Split

SAP AG 2002, Actual Costing / Material Ledger 12

Actual Costing with Material Ledger

Motivations for usage of Material Ledger

How does it work?

Handling

What do we get?

SAP AG 2002, Actual Costing / Material Ledger 13

Set up
Customizing is very simple and quickly done:
n Activate appropriate flags per plant
n Select the currencies to be used
n Run a program for the productive startup w/o existing
material and transaction data

Note: Deactivation or changes in currency setting are not as simple later !

SAP AG 2002, Actual Costing / Material Ledger 14

During the period

no user action required: All material ledger updates and data

collection is done automatically.
Data is evaluated from:
n Goods receipts
n Invoices
n Subsequent debits or credits
n
n
n
n
n

Goods issues
Production order confirmations
Stock transfers
Production order settlements
...

Prices a

re froze
No pric
n
e change
during
the peri
od

Reporting i s available in realtime

SAP AG 2002, Actual Costing / Material Ledger 15

Steps after the Period End

External Procurement

1:
Single level
price determination

Production

2:
Multi level
price determination
Production Variances

3:
Post Closing Entries

Price Differences
Cost Center Variances

Stock

SAP AG 2002, Actual Costing / Material Ledger 16

Cost of Sales

Actual Costing with Material Ledger

Motivations for usage of Material Ledger

How does it work?

Handling

What do we get?

SAP AG 2002, Actual Costing / Material Ledger 17

Periodic Unit Price

Actual Price for a Period

Price based on actual transactions
Constant over the whole period
New price calculated after period end
No sequence dependence as in moving average price
Price

Moving Average
Price
PUP Period 2

PUP Period 1

Periodic Unit
Price
Standard
Price

Period 1

Period 2

SAP AG 2002, Actual Costing / Material Ledger 18

Time

Actual Price & Cost Component Split

Actual Price with Cost Components

Reflects actual cost structure
Can be compared to planned price

SAP AG 2002, Actual Costing / Material Ledger 19

Transparency of Value Chain

Price analysis for Material

Procurement controlling
Drill down to source documents
Visibility of usage
Price history

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10

Procurement Alternatives
Different procurement methods are used separately, and have
individual quantities, costs, and cost splits.
n External procurement separately per vendor
n Production by production alternative (different lines, different recipes
etc)
n Subcontracting per subcontractor
n Stock transfers per transferring plant or company

SAP AG 2002, Actual Costing / Material Ledger 21

Actual Production Structure

What did I use to produce 50 Pc of my chocolate product
product?
?
which materials, which activities?
what costs came by which ingredients?
where are the deviations from my planned costs?

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11

Actual Costs on Balance Sheet Accounts

Actual values in Accounting (optional)

Stock accounts reflect actual costs
Cost of sales at actuals
Cost center variances included in material costs
Price difference accounts cleared
Stock
Production Variances

Price Differences
Cost of Sales
Cost Center Variances

SAP AG 2002, Actual Costing / Material Ledger 23

Profitability Analysis based on Actual Costs

Actual Values in Profitability Analysis

Contribution Margin Accounting
Cost of Sales Split into Cost Components
Plan/
Plan/Actual
Actual Variance Analysis
Sales Quantity
Quantity::
Revenues::
Revenues
Plan

Actual

1,000 pc
100,000 US$

Var. %

Var. Abs.

Raw Materials
Labor variable
Machine variable
Logistic Processes
Material Overheads

50,000
4,000
4,000
10,000
5,000

45,000
5,000
4,500
7,000
5,500

5,000
- 1,000
- 500
3,000
- 500

10 %
- 25 %
- 13 %
30 %
- 10 %

Contribution Margin I

27,000

33,000

6,000

22 %

Labor fix
Machine fix

10,000
7,000

10,000
7,000

0
0

0%
0%

Contribution Margin II

10,000

16,000

6,000

60 %

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12

Actual Costing is ...

Risk
y

ated
c
i
l
p
Com

ult
Diffic

Rarely used

SAP AG 2002, Actual Costing / Material Ledger 25

Actual Costing is ...

Mature
Simple
to use

Powerful

Challenging
Stable

SAP AG 2002, Actual Costing / Material Ledger 26

13

Easy to
set up

Customers
Nestl Runs Material Ledger.
Du Pont Runs Material Ledger.
BASF Runs Material Ledger.
Eastman Runs Material Ledger.
Stihl Runs Material Ledger.
Unilever Runs Material Ledger.
Shell Runs Material Ledger.
Daimler Chrysler Runs Material Ledger.
Volkswagen Runs Material Ledger.
Texas Instruments Runs Material Ledger.
Hewlett Packard Runs Material Ledger.
Procter & Gamble Runs Material Ledger.
Colgate Runs Material Ledger.
Nokia Runs Material Ledger.
Siemens Runs Material Ledger.
Fuji Runs Material Ledger.
Sony Runs Material Ledger.
Pepsi Runs Material Ledger.

SAP AG 2002, Actual Costing / Material Ledger 27

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