on 05-17-2013 9:00 AM
Hi,
Client who is in Trading activity and operating business in different countries want to implement material ledger. Following are the facts
1) Product costing is not applicable
2) No transfer Pricing
3) Want to calculate periodic unit price
4) Valuate a stock in different currencies
5) COPA implemented
6) Split Valuation is to be considered
Considering the above facts, client want to implement material ledger and want to have smooth reporting on gross margin which should be reflected through COPA reports. Group currency is USD and company code currency is Kenyan Shilling. So when the exchange rate fluctuates, the reporting in USD and in Kenyan shilling disturb the picture of gross margin.
For e.g consider two receipts at different dates and rates say on 5th May ,1 USD = 95 Kenyan shilling (10 units and total USD=1000) and other receipt on 11th May (5 units and total USD= 525) for 99 Kenyan shilling. Also sale of 5 units @ 108 per USD against the exchange rate of 1 USD= 102.50 Kenyan shilling on 13th may.
If we apply moving average price for COGS in Kenyan shilling to calculate the margin and apply historical costing for USD there is a huge difference in gross margin.
Now the requirement is client want to have a COPA reporting which shows a same uniform margin ratio in percentage for both currencies i.e. Kenyan shilling and USD.
In this regard request you to guide me on following
A) which price control is required for material i.e. V or S
B) What will be the effect on closing stock if price control is kept as S
C) Can the periodic unit price be set as a standard price for the next period ( I am not sure whether we can set PUP as a standard price without costing RUN)
D) Will it be OK to keep price control as S to avoid the fluctuations in Currencies assuring the uniform margins in both currencies.
E) If price control is kept as S and there is NO stock at the end of period for a particular material where material ledger have captured the price differences and exchange rate fluctuations. What will be the effect on P& L account
G) What will be the impact of split valuation on the stock
H) Maximum number of currencies the stock can be maintained and the setting required for the same.
Since I am in a process of learning Material Ledger, would request you to guide me on these issues.
regards,
makrand
Any replies please?
regards,
Makrand
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A) which price control is required for material i.e. V or S
Answer: When you intend to use ML, you must set Material Price Determination Control to 3; this will ensure that Material Price is S; When this setting is applied, the Price & Exchange Rate Variances are loaded back to material at period End.
B) What will be the effect on closing stock if price control is kept as S
Answer: at Period End, you have to execute the CKMLCP; for example, current month is May. on 31st May, you will close May and Open June [both Logistic and Accounting]; then you have to execute CKMLCP for May; The Price/Exchange Rate Differences as accounted in May are bifurcated in to Consumption and Closing Stock and System will calculate PUP for May and revaluate the Consumption and Closing Stock for May.
C) Can the periodic unit price be set as a standard price for the next period ( I am not sure whether we can set PUP as a standard price without costing RUN)
Answer: Yes, you can set the PUP as Standard Price. You have an option of Marking PUP in CKMLCP; However, note that, you will be finalizing PUP in June. This PUP relates to May. You can set May PUP as Standard Price for July [Since June is already in progress and Logistic Entry might have been already posted while you are calculating the PUP for May]
D) Will it be OK to keep price control as S to avoid the fluctuations in Currencies assuring the uniform margins in both currencies.
Answer: When ML is active, have Price Determination Control = 3 [and Price Control will be automatically S]; during the month system collects fluctuations as Exchange Rate Variances; At Period end all fluctions are loaded back to Materials;
Also read SPRO node Configure How Exchange Rate Differences Are Treated [TCode OMRW] and related Help.
E) If price control is kept as S and there is NO stock at the end of period for a particular material where material ledger have captured the price differences and exchange rate fluctuations. What will be the effect on P& L account
Answer: At the period end when we do not have stock, then it means that all stock is consumed. In such case all differences [Price Difference and Exchange Rate difference] is posted to consumption.
G) What will be the impact of split valuation on the stock
Answer: Material Ledger recognizes split valuation; Standard cost for Split Valuation is updated only for the split that is related to In House Production. I am not aware of How and What of Split not related to In house production; Seniors on this forum can guide us in this aspect.
H) Maximum number of currencies the stock can be maintained and the setting required for the same.
Answer: 3 currencies; Please review Transaction Code OMX2 and SPRO node Assign Currency Types to Material Ledger Type and related help for more information.
Satya
All answers are to the best of my ability and knowledge and understanding of the questions.
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