Moving Average Price Vs Standard Price

Moving Average Price Vs Standard Price

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.

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Product Costing IO Budgeting

Product Costing IO Budgeting

Internal order is going to be used for budgeting, collection of cost. Internal order will be used for control of Capital Expenditure, Advertisement cost, R & D expenses, Exhibition Cost, Manufacturing meet, Project etc.

During planning stage planned cost is estimated and once the planned cost is approved, funds equivalent to approved planned cost is prescribed as budget.
In case of unforeseen events, additional budget requirement due to for example Price rise in external activities will be updated as Supplementary Budget and similarly in case of reduction, budget can be reduced by updating Return.

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