SAP offers two methods of inventory valuation and product costing: standard cost and (weighted) moving average. The method to be used is identified on the material master level, thus different materials can use different methods within a plant. Although SAP does not restrict this choice, moving average is typically used only on purchased materials.
The decision to use moving average for certain materials should reflect the approach used to analyze contribution margins, and variances in manufacturing and purchasing. Use of moving average on purchased materials may be appropriate where the item is an easily obtained commodity, with small fluctuations in cost. In such situations, the impact on margins is minimized, reducing the need for formal variance analysis.
From a practical point of view, some of the key differences and considerations in how this would be reflected in the system are identified below. » Read more: Moving Average Price Vs Standard Price
