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SAP Standard Vs Moving Average Price

There are two main methods for inventory valuation in SAP - standard price and moving average price. SAP recommends setting standard price for semi-finished and finished products to avoid issues with stock coverage affecting the moving average price. They also suggest using moving average price for purchased materials to provide real-time valuation, though it does not allow analysis of price differences like standard price does. A third option is activating the SAP Material Ledger for detailed analysis of inventory transactions and price variances.

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Kathiresan Nagarajan
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546 views2 pages

SAP Standard Vs Moving Average Price

There are two main methods for inventory valuation in SAP - standard price and moving average price. SAP recommends setting standard price for semi-finished and finished products to avoid issues with stock coverage affecting the moving average price. They also suggest using moving average price for purchased materials to provide real-time valuation, though it does not allow analysis of price differences like standard price does. A third option is activating the SAP Material Ledger for detailed analysis of inventory transactions and price variances.

Uploaded by

Kathiresan Nagarajan
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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6/13/2021 SAP Standard vs Moving Average Price

SAP Standard vs Moving Average Price


Jun 23
Posted by John Jordan in FI-CO Blog

You choose standard or moving average price for inventory


valuation. Let’s discuss each method in detail. You change the price
control indicator with transaction MM02 or by following menu
path: Logistics • Material Master • Material • Change

Navigate to the Costing 2 view to display the screen shown in Figure 1.

Figure 1: Costing 2 View Valuation Data Section

The Valuation Data section contains the Price control field which determines if a material is valuated by
Standard (S) or Moving average (V) price. You can change from S to V price control at any time. The target
field, in this case the Moving average price, is overwritten with the Standard price to endure there is no
change in inventory valuation for existing stock.

SAP suggests you set standard price control for all semi-finished and finished products. Problems with
moving average price can occur if you consume more assemblies than you produce during a period. There
may not be enough stock coverage to absorb differences when settling production orders at period-end
leading to an unrealistic moving average price. Read more details of stock coverage and moving average
price in SAP Note 81682.

SAP also suggests you use moving average price for purchased materials. Inventory will be revalued for
every goods and invoice receipt with a price different to the moving average price. While this provides the
advantage of real-time inventory valuation, it has the disadvantage of not providing purchase price
difference (PPV) postings for analysis.

If you set price control to standard for purchased materials all price differences will post to PPV general
ledger accounts which you can analyze to help you understand why actual price differs to plan purchase
price. While this promotes more accountability for purchased materials price, it has the disadvantage that
inventory valuation may not be as accurate as with moving average price control.

Your goal of setting purchased materials to standard price is to progressively reduce PPV postings by
correcting the cause of the variances. PPV postings will become less significant over time as you gain a
better understanding of how the differences occur. You gain close-to real-time inventory valuation and
purchasing controllability as you reduce PPV.

When working on SAP Price Control we recommend you work with our ERPCorp experts: Learn about
ERPCorp Coaching & Consulting.

You can also activate SAP Material Ledger for detailed analysis of all difference postings. You can activate
the Material Ledger without the actual costing component. In this case you generate a Material Ledger
document for every inventory transaction. You can display a list of Material Ledger documents with
Transaction CKM3 or by clicking the material price analysis button in the material master Accounting 1 view
as shown in Figure 2.

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6/13/2021 SAP Standard vs Moving Average Price

Figure 2 Material Price Analysis Screen

To display a material ledger document expand the hierarchy and double-click an individual document
number.

Your three options for inventory valuation have advantages and disadvantages:

 - Standard price allows accountability for purchase price variances

 - Moving average price provides more real-time inventory accuracy

 - SAP Material Ledger allows you to calculate actual cost by determining the portion of the variance debited
to the next-highest level using material consumption.

PRINT

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