Price Control Standard Price vs Moving Average Price

There are two types of price control:

Ø      Standard price

Ø     Moving average price

Ø  When a material is valuated at a moving average price, the price changes in line with the delivered costs. If the purchase order price or the invoice price varies from the price in the material master record, the R/3 System posts the difference to the stock account if there is stock coverage for the invoice quantity. As a result, the value and the price of the material change.

Ø  When a material is valuated at a standard price, the R/3 System posts differences between the

purchase order price or the invoice price and the price in the material master record to a price

difference account. As a result, the price in the material master record remains constant.

Material Valuation Procedures

 Standard Price vs Moving Average Price

Ø  Valuation of goods receipts depends on the price control procedure you set in the material master record. In the R/3 System, material valuation can be carried out according to the moving average price procedure (V price) or the standard price procedure (S price).

Ø  In the standard price procedure (price control “S”), the system carries out all stock postings at a price defined in the material master. Variances are posted to price difference accounts.

Ø  In the moving average price procedure (price control “V”), the system valuates goods receipts with the purchase order price and goods issues with the current moving average price. The system automatically calculates the latter upon every goods movement by dividing the total value by the total stock quantity. Differences between the purchase order price and the invoice are posted directly to the relevant stock account if there is sufficient stock coverage.

Ø  You set the material valuation procedure you want to use in the accounting view of the material master record. In the R/3 System, you can carry out material valuation using the standard price procedure or moving average price procedure.

Ø  Irrespective of the valuation procedure set in the material master record, the system increases the stock quantity by the relevant goods receipt quantity when you post a goods receipt into stock.

Step1:

Ø  The initial stock quantity and value are displayed in the “Initial situation” column.

Ø  For statistical purposes, the system also calculates the moving average price for materials that are valuated at the standard price. This means that you can spot major differences between the current procurement price and the standard price and react accordingly. 

Ø  The system calculates the total stock value of materials with standard price control as follows:

total value = standard price (per base unit of measure) * total stock.

Step2:

Ø   The system updates the stock value and the stock quantity with the standard price.

Ø  It updates the GR/IR clearing account with the purchase order price.

Ø   It posts the difference between the purchase order price and the standard price to the price difference account.

Step3:

Ø  The system clears the GR/IR clearing account with the purchase order price.

Ø  It updates the vendor account with the invoice price.

Ø  It posts the difference between the purchase order price and the invoice price to the “income from price differences” account. It does not change the total stock value.

  

Step1:

Ø  The initial stock quantity and value are displayed in the “Initial situation” row. 

Step2:

Ø  The system updates the stock value, stock account, and GR/IR clearing account with the purchase order price.

Ø  It recalculates the moving average price on the basis of the new stock value.

Ø  Moving average price (per base unit of measure) = total value / total stock 

Step3:

Ø  The system clears the GR/IR clearing account with the purchase order price and updates the vendor account with the invoice price. It posts the difference between the purchase order price and the invoice price to the stock account and recalculates the stock value based on the invoice price.

Ø  The system redetermines the moving average price based on the new stock value.

Ø  If the stock quantity is less than the invoice quantity, the system posts part of the difference to the “Expenditure/income from price differences” account instead of the stock account.

Valuation Type in SAP

Valuation Type


The valuation type is an individual characteristic of a valuation category.

For example, within the valuation category "origin" the valuation types would be the different countries. You define valuation types in Customizing. You first determine all the valid valuation types for a valuation category. Then you enter the individual valuation types allowed for a material in the material master record.

For every material with split valuation, you must enter all the valuation types allowed in the material master record.

The following graphic shows three scenarios of Split Valuation:

Scenario 1:

You procure a material both from in-house production and from external vendors. You want to valuate the stocks from each source separately. In this case, you select procurement type as the valuation category (B) and Internal and External as valuation types.

Scenario 2:

You procure a material from several countries. You want to valuate the stocks from each country separately. In this case select origin as the valuation category (H). As valuation types, you define the relevant countries, for example Italy and France.

Scenario 3:

You procure a material in different grades. You want to valuate, the stocks of each class separately. In this case, you select Quality as the valuation category (Q). As valuation types, you could define A, B, C and D.

How to change Valuation Class in Material Master

Option1:
Goto TCode MMAM - This TCode is for changing the material type and not valuation class.

If you change the material type in MMAM transaction automatically, the valuation class will be changed in material master. The system will take the changed material type valuation class that was created for that material type.
Option2:
Goto TCode MM02 - Accounting View 1 - This TCode is to change the valuation class directly.
Whether you can or cannot change the valuation class directly without changing the material type depends on your own company img settings.

If you want to change the valuation class, there may be because of one or more of the following already exist for the material:
1) Valuated stocks in the current period or in the previous period.
2) Open purchase orders may be there.
3) Production orders which a goods movement has already taken place.

For this first you have to do the following:
 If valuated stocks already exist, you can change the valuation class only:
a) Post the stocks of the material to an interim account.
b) Change the valuation class in the material master record.
c) Post the stocks of the material back to their original account.

 If open purchase orders already exist, you can only change the valuation class if you first flag the corresponding purchase order items for deletion.

If production orders exist for which a goods movement has already taken place, you can only change the valuation class if you first set the status of the production orders to deleted
By this you can keep the same material type as FG and can assign the proper valuation class.

Valuation Structures

Valuation takes place within the following structures:

• The Valuation Area specifies the organizational level at which valuation is carried out.
• The Valuation Class contains materials with similar properties that have been grouped together for accounting purposes.
• The Valuation Category specifies the criterion according to which split valuation is to be carried out.
• The Valuation Type specifies the characteristic used for split valuation.

Valuation Area 
The valuation area specifies the level at which materials are valuated. You can define a valuation area in the following ways:

• Valuation area = company code

All stocks of a particular material in this company code are valuated together.

• Valuation area = one plant

The stocks of a particular material in this individual plant are valuated together. Stocks in other plants are not included in this valuation area.

Valuation Class 
So that you do not have to manage a separate stock account for every material, you can group together different materials with similar properties into valuation classes.
This table contains examples of possible valuation classes:

Valuation class	Description
3001	Colors
3002	Paints
3011	Oils
3021	Foam materials
3030	Operating supplies
3040	Spare parts
3100	Trading goods

The valuation class that a material can be assigned to depends on the material type. You can define the following assignments in Customizing:

Ø  All materials with the same material type are assigned to just one valuation class.

Ø  Different materials with the same material type are assigned to different valuation classes.

Ø  Materials with different material types are assigned to a single valuation class.

A material is assigned to a valuation class in the material master record. The system checks whether the material type allows the material to be assigned to the valuation class specified.
The system refers to the valuation class of a material to determine which stock account to post to when a posting is made for this material.
Valuation Category 
You can use split valuation to manage stocks of a material according to different criteria. Examples of such criteria include:
Procurement
You can valuate a material differently depending on whether it is manufactured in-house or procured externally
Origin
You can valuate a material differently depending on where it comes from (such as home or abroad)
Status
You can valuate a material differently depending on its status (such as new, used, repaired)
You define the valuation categories in Customizing. A material is assigned a valuation category in the material master record.
The individual characteristics that make up a valuation category (such as "internal" or "external" in the case of Procurement) are called valuation types.
Valuation Type 
The valuation type is an individual characteristic of a valuation category. For example, within the valuation category "origin" the valuation types would be the different countries. You define valuation types in Customizing. You first determine all the valid valuation types for a valuation category.
Then you enter the individual valuation types allowed for a material in the material master record. For every material with split valuation, you must enter all the valuation types allowed in the material master record.