on 06-12-2009 4:07 PM
Hi
I am very new in Product Costing.
I need you advise about product costing especially moving average and standard cost.
1. What's the different between standard cost and moving average. And how do we know when to use moving avg or standard cost?
2. If I use standard cost the different between standard cost * actual QTY and moving avg * actual QTY will be put in
varince right?
3. In case we use moving avg. why do we no need to cal varince (KKS2)?
Please help me to clearify this point.
Thanks and regards,
June.
Dear June,
Check these links,whether can it help you,
Some Basics about product costing,
Check this for capturing power cost,
http://www.sap-img.com/production/set-parameter-and-work-center-formula.htm
http://help.sap.com/saphelp45b/helpdata/en/7e/cb7d6343a311d189ee0000e81ddfac/content.htm_
http://help.sap.com/bpprimarysteel1500/Steel_China/Documentation/T30_Scen_Overview_EN_ZH.ppt_
(Power Point presentation).
http://help.sap.com/erp2005ehp_03/helpdata/EN/82/e72326b11411d29f60080009b0db33/frameset.htm_
(Master data of PP in Product Cost controlling)
Regards
Mangalraj.S
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Dear Sir,
the below links are not opening can you help to get the information in this links. thanks and regards.
http://help.sap.com/bp_primarysteel1500/Steel_China/Documentation/T30_Scen_Overview_EN_ZH.ppt_
(Power Point presentation).
http://help.sap.com/erp2005ehp_03/helpdata/EN/82/e72326b11411d29f60080009b0db33/frameset.htm_
1. The difference between Standard cost and Moving Average is that Standard cost is fixed and is updated through cost run whereas Moving average price keeps on changing with every new purchase. Usually Costing run is done once in a period. Standard Cost is used for Finished Goods (FERT) and Semi finished goods (HALB) if that is not used as raw material for further production. Moving Average price is used for Raw Material and Semi Finished Goods (only if SFGs are used as raw material for further production).
2. Variance is difference between Standard CostActual Qty and Actual CostActual Qty where Actual Cost comprises of material cost, process and conversion cost and selling exp.
3.You donu2019t need to calculate variances in case of Moving Average Cost, as there is no standard cost or actual cost.
Hope this clear your doubts.
Thanks,
- Mahak
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Hi Junenaku,
Generally all raw materials (ROH), spare parts (ERSA), traded goods (HAWA) etc. are assigned as moving average price (MAP) because of the accounting practice of accurately valuating the inventory of such materials. These materials are subject to the purchase price fluctuations on a regular basis.
Company generally use moving average on purchased materials with small cost fluctuations. It is most appropriate when the item is easily obtainable. The impact on margins are minimized which reduces the need for variance analysis. Furthermore, the administrative effort is low as there are no cost estimates to maintain. The cost reflects variances, which are closer to actual costs.
The semi-finished goods (HALB) and finished products (FERT) are valuated with standard price because of the product costing angle. If these were to be MAP controlled, then finished/semi-finished product valuation would fluctuate due to data entry errors during backflushing of material and labour, production inefficiencies (higher cost) or efficiencies (lower cost). This is not a standard accounting and costing practice.
Refer to OSS note 81682 - Pr.Contr.V for semi-finished and finished products.
SAP recommends that standard price to be used for FERT and HALB. If actual price is required for valuation, make used of the functions of material ledger where a periodic actual price is created which is more realistic.
e.g. how SAP calcualte the moving average price
Goods Receipt for Purchase Order
Balance on hand quantity + Goods Receipts quantity
Balance on hand value + Goods Receipts value
New Moving Average Price = Total Value / Total Quantity
Invoice Receipt for Purchase Order
Invoice price more than Purchase Order price
additional value add to Balance on hand value then divided by Balance on hand quantity
Invoice price less than Purchase Order price
difference is deducted from the Balance on hand value (up to 0). The rest of the amount will becomes price variance. This will result in Balance on hand value is zero while there are Balance on hand quantity. If the Balance on hand value is enough to deduct, then the remaining value will be divided by Balance on hand quantity.
When your Goods Issue price is constantly greater than your Goods Receipt price, it will result into zero value moving average price.
OSS note
185961 - Moving Average Price Calculation.
88320 - Strong variances when creating moving average price.
Hope this clears you.
Regards,
Hari.
Edited by: Hari Krishna Kudaravalli on Jun 12, 2009 8:47 PM
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