Material Ledger

What precautions have to be taken while switching on the materialledger for a plant?

A material ledger once activated for a plant cannot be switched off. Therefore it is important that
the material ledger be activated carefully for a plant.

How do you go about configuring material ledger?

The following are the steps:-

1) Activate Valuation Areas for Material Ledger

2) Assign Currency Types to Material Ledger Type

3) Assign Material Ledger Types to Valuation Area

4) Maintain Number Ranges for Material Ledger Documents

5) Activate Actual costing (whether activity update relevant for price determination)

6) Activate Actual cost component split

7) Customizing settings in OBYC

What are the problems faced when a material ledger is activated?

When a material ledger is activated it is imperative that actual costing run has to be done every
month. Actual costing run needs to be done immediately after the new month roll over. After the
actual costing run you cannot post any MM(Materials Management) entry to the previous period.

What are the options available while performing revaluation in an actual costing run?

There are 2 options available:-

Revaluation – You can revalue the finished goods stock

Accrual – You can accrue the revaluation gain or loss without actually changing the price in the
material master.

What is the configuration setting to be done for posting the accrual in the actual costing run?

In transaction code OBYC select transaction key LKW and maintain the balance sheet account for
accrual.

What are the steps to be taken before you execute an actual costing run?

The following are the steps to be taken:

1.) Execute all the allocation cycles in the cost cente accounting module.
2.) Execute actual activity price calculation.

3.) Revalue all the production orders with the actual activity prices. The under or over absorbed cost
on cost centers are passed on to the production order through this step of revaluation of production
orders.

4.) Calculate overheads, do a variance calculation and finally settle the production order.

5.) Finally execute the actual costing run.

What happens in an actual costing run?

In actual costing run there is a process of single level price determination and multi level price
determination.
The production price difference variances are collected on the material ledger for each of the
finished goods and semi finished goods.

During single level price determination the price difference collected on a single finished product is
allocated to consumption. This allocation to the consumption is not individually allocated to the
good issues.

In multi level price determination the price difference is allocated to individual goods issue. The
price differences are passed on to the next level of consumption.

The system calculates a weighted average price for the finished goods and semi finished goods. This
weighted average price is called as the periodic unit price

What happens when the revaluation is done in actual costing run for the previous period?

When revaluation is performed in actual costing for the previous period the price control in the
material master is changed from S to V and the periodic price is updated as the valuation price for
the previous period.

What is the importance of the price determination indicator in the material master for the
purpose of actual costing run?

There are 2 price determination indicators in the material master when

material ledger is activated.

They are as follows:-

2 – transaction based

3 – Single level / multi level

In case of material masters having price determination indicator 2 no actual costing will take place.

In case of material masters having price determination indicator 3 actual costing will take place.
What should be the price control for a material master which has a price determination indicator 3
where material ledger is activated?

In such a case only price control S is possible where the price determination 3 is activated in material
master.

Issue 1: A material has been extended in plant xxxx and due to some reason material ledger could
not get activated in accouting 1 view of a material master. As of now there is no transaction has
been made in plant xxxx for tis material. Material ledger is activated at plant level because for other
material it is activated.

OX14: Valuation assignment as plant or company code.

OMX1: Activation of Material ledger valuation area wise.

OMS2: Quantity value update for material type.

OMS2 transaction whether quantity and value updation is active for that material type in
that valuation area
(for ML to be active both quantity and value updation should be active).(Mandatory)

Issue2: The actual cost of option1 and option 2 for a FG is same if you don’t use the WIP revaluation
function of material ledger.
If your client want to collect overhead cost using production orders and cost collectors, you must use
activity revaluation. So, you must activate actual costing with option “1”.

You can display actual activity amount using report CKMLQS-Valuated Quantity Structure.

If you want to update the consumption of activities in the actual quantity structure and allocate the
difference between the activity prices posted during the period
and the actual price at the end of the period to the material using material ledger closing(price
determination), you must activate actual costing with option ‘2’.
If you only want to update the consumption of activities in the actual quantity structure, you must
activate actual costing with option ‘1’.

If you activate actual costing with option ‘2’. you should skip the step 'revaluate actual prices' during
period closing for Cost Object Controlling for preventing from applying actual price to material
twice.

This setting is not related to "Price Transfer" and "Multiple Valuation" features.
This setting is only related to actual costing.

CKMLQS(Valuated Quantity Structures (Multilevel)) display Hierarchical overview of values and

quantities for all materials and activity types.

In ML (CKM3N) they could see Cost Component Split, however they need more details in the same
window. They don't want to enter in other transactions (KOB1, KSB1) to see details.
you can insert the logic, which get the actual quantity from table COSS and actual price from table
COST and multiply the actual quantity and actual price, to z-report.

SAP Note on Material Ledger that after deactivation

Prices and inventory values in parallel currencies and their histories are lost.
The parallel currency records of the purchase order history are deleted. In the case of a new material
ledger production startup, the original values cannot be recovered.

Issue: We added new company codes with new currencies and new plants. As it turned out we had
to create and assign the new material ledger type to every new plant and not to use the material
ledger type of old plants. Of course after activating of material ledger no any changes we could do in
test system, only in another test system. That's why you should be carefull and make following
steps:

1. SPRO - activate material ledger for new plants

2. SPRO - create new material ledger type

3. SPRO - assign new plant to new material ledger type

4. CKMSTART - set valuation area as productive for new plants

5. CKMADJUST - reconsilation of material subledger and general ledger

****We have found out that Material-Ledger can be deactivated with report SAPRCKMJX. (OSS
108374, 425487). the program SAPRCKMJX does NOT reset the Customizing of the material ledger.

Thus, in Customizing of the material ledger you must remove the active indicator manually.

******The consequences of deactivating the Material Ledger are:

- All historical data is deleted
- No valuation of materials in parallel currencies
- Purchase order History is deleted and cannot be recreated
- Actual Costing is not possible any more
- Actual Cost Component Split information is deleted
In fact you will delete all the Material Ledger tables.
How to deactivate material ledger is explained in note 108374.
The note advises you to contact the Development Support just to make you aware of the
consequences.
The runtime of program SAPRCKMJX depends on the amount of ML data in your system and it is
hard to estimate.
Note 425487 explains the limitations for deactivating ML in productive systems.
When you start using Material Ledger, you have two steps:
- 'activate' ML in SPRO, and then
- 'set ML as productive' by running CKMSTART.
When we say 'deactivate ML' in note 425487, we mean both steps:
- reset ML from productive by running report SAPRCKMJX
- 'deactivate' ML in SPRO.
Please test the deactivation on your test system first. If you are satisfied with the results you can
proceed with your productive system.

Issue:…check the following notes which give a detailed information about Material Ledger
activation:

596558 Material ledger production startup

384145 Advice note on material ledger production startup

165844 Material ledger production startup

Please, check attached note 596558, which provides recommendations on Material Ledger
production startup:

b) Always activate the material ledger for a complete company code and copy all currencies from FI.
This is the only way to ensure the reconciliation with FI.
c) In addition, it is recommended that you activate the material ledger for a complete company code
because the invoice verification can neither store invoices that contain materials from plants the
material ledgers of which are active nor more materials from plants the material ledger of which is
not active.

Please, consider that only transactions performed after the start upwill be taken into account for the
actual price calculation. You can run the productive startup also in the middle of a period, but take
into account the recommendation in note 596558, point d.

d) If you want to activate the actual costing, it is recommended that you do this at the period start.
As of the point in time of the activation, material movements are then updated in the material
ledger quantity structure tool, and you can use multilevel costing.

Concerning the updating in the general ledger accounts, please check the attached note 908737. The
leading ledger will be updated according to the general ledger accounts customized in transaction
OBYC.

Related to the ML Deactivation in a productive system, be aware of the effects of the Deactivation.

If you deactivate Material Ledger for a productive plant, the material ledger master data is deleted.
Prices and inventory values in parallel currencies and their history are lost.

To deactivate Material Ledger you have to read note 425487 carefully, which explains the
deactivation effects.

Please, consider the following topic:

Deactivating the material ledger from a Profit Center Accounting point of view:

If transfer prices are active in your system, you cannot deactivate the material ledger. Refer to Note
175758.

When you start using Material Ledger, you have two steps:

- 'activate' ML in SPRO, and then

- 'set ML as productive' by running CKMSTART.

When we say 'deactivate ML' in note 425487, we mean both steps:

- reset ML from productive by running report SAPRCKMJX

- 'deactivate' ML in SPRO.

Note 108374 references the step 'set ML as deproductive'.

The consequences of deactivating the Material Ledger are:

- All historical data is deleted

- No valuation of materials in parallel currencies

- Purchase order History is deleted and cannot be recreated

- Actual Costing is not possible any more

- Actual Cost Component Split information is deleted

In fact you will delete all the Material Ledger tables.

If you don't use transfer prices and if the leading CO-version 0 is

not managed in profit center view you can deactivate ML according to

note 108374. Therefore report SAPRCKMJX has to be run and the

Customizing has to be deactivated afterwards.

MLMST: Std table to store material ledger document

****CKMSTART: Create a background job for making the valuation area productive for activation of
materal ledger. After the Job is run in SM37. PFB the screen shot.

Does ML works with Sales order costing and variant config?

yes it does. Actual costs will be collected on the level of a sales order item. E.g. if you enter CKM3
the centarl display of material ledger you will see costs and collected material movements only
related to material + plant + sales order item. Also the month end closing will use that level of detail
How does ML handle work-in-process?

very good question. Up to release4.7 that was a real gap. If major value were sitting in WIP and
consumptions fro production often did not happen in the same period as the receipts from
production, major disformations in the costs would have resulted.

How is opening stock at actual cost migrated?

This enters actual costing with the valuation price it had before. No transactions from before the ML
activation will be taken into account. So generally it takes a couple of months until actual costs
refelect the reality, depending on the production lifecycle length

****In actual costing upto period end(say for a month) costs of RM,WIP,FG etc are to be maintained
under standards costs only, after closing the month end activities ie. your have to do Actual cost Run
at the month end, then the variances(diff between actual and standard) are to be settled to the
respective material, then the stocks will be treated as actual costs. Generally many organisations will
follow last month actuals will be current month standard month, then the variance also will not be
more. But my sincere suggestion is to follow Standard Costing only instead of going for Actual
Costing.