How is stock valuated in SAP - Part 1

Siva Prasad
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SAP Trainer and Consultant
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SAP MM Training - in Plain English

You know English ? That's more than enough to learn SAP MM

26:00:09 of on-demand video • Updated August 2018

  • Understand the major business processes in SAP MM
  • Understand how to complete the business processes in SAP MM
  • Understand key technical concepts ( apart from the business processes ) like Movement Types
  • This course is NOT just a short HOW-TO. It deals with all the important business processes in SAP MM
English [Auto] You've seen the accounting tab with the material master that there's something called a valuation class. What is valuation class and how does it affect the value of the material? And I said, for price control select, we typically for all materials that are procured. Not manufactured. All materials that are procured have a price control of the. What is V V stands for moving average price? Or maybe you could call it weighted average or it's all the same thing, it's averaged out every time you procure, we're going to talk about it. So why don't we do something? Let's create a material. Set the moving average price to zero by default and then start issuing some pills and see the difference. So we're going to do M0 one. Let's get a brand new material, coffee beans instead of zero three, let's call it zero six so that we know that this is a different material and it's just starting off retail sector and it's a raw material. Right. So hit enter. And we are only interested in three views, basic data, purchasing data, accounting data. It OK for plant. As usual, we use the Chicago plant. And the coffee beans or bags, whatever. I'm. Material group is food aid, dental. And purchasing group is one identies. And finally, the valuation classes, three thousand and price control is we we for moving average and if you look at the possible options there, you'll see two different values. Yes, four, standard price re for moving average price. Like I said, for all materials that are procured externally, always use we we for moving average. All right, so we're done with that. We're going to see. It's going to issue a warning, ignore that click, OK? All right, coffee beans, all six is created. And of course, if you go back to coffee beans. It to go to the accounting view. And top line, Chicago one. You'll see that the total stock is zero. The moving average price is zero and the total value is zero. So nothing has been procured. We don't have stock yet. And the average price of the moving average price is zero. So let's keep the screen right there and go open another screen and do the purchase order every twenty one and. All right. Doesn't matter which one to select some random. And of course, the pictures are of you as one sumptuous group and company called us Ettalong. Select coffee beans, not all three, but all six, the material that we have just created and we're going to do a quantity of one, just one. Of course, use of plan, Chicago, one and two, and we're going to put a price of ten dollars. Baronetcy. OK, a purchase orders created. Let's go quickly say. Control. See, if you go back to the other window, you'll see that nothing has changed you. If you want to see the changes, the screen doesn't refresh automatically, so if you want to see the changes, you've got to go back. And then. It enter again, good accounting, you enter Chicago one into. So that's how you refresh for changes. But over here, nothing has changed. Stock remains zero, value remains zero, moving average price remains zero. So that means so irrespective of the number of purchase orders that you created, the value does not change. But when does a value change? Value changes during goods visit. That's when we have received the goods, the physical inventory and the stock goes up and a whole bunch of changes happen. Let's go to a receipt for the good seat. All right, the transaction for goods receipt is my go to go to my. And approaches under control by. And still, his location nonmaterial. Make sure to click item, OK, so we're receiving a quantity of one at the price that we have seen in the purchase order. Ten dollars click save. Material documents created that means we have completed the process of receiving the goods, go back to the other screen, the material master screen. Start all over again. Counting one. Chicago one, you see that the moving average price of the moving prize has changed to ten dollars and the total value is ten dollars and the total stock is one dollar. So as soon as you finish the goods received, SFP is automatically updated the material Master M.. With what? With the price, the quantity and the total volume. The total value is really simple, the price multiplied by the total stock. You see the total value of catch up with the. What have you done here? We have Crerar material, master four zero six. So the price control to me and of course, the sense we are creating this material for the first time, moving average price is zero and the total value of zero total stock is know everything is zero. The first step that we have done is create a. When we created the P.O. after he saved it, you went back to the material master. Nothing has changed. And after that, you've done the good with it, so when you've done the good, see, that's when the prizes changed, the price changed, the stock changed and the total value changed. The total value is basically a multiplication of this and this. So if you multiply what this feels. You get the total value, right? So if you do another purchase order at a price of ten dollars per kilo or palm, the effective average price is going to remain the same. Right. So that scenario is simple. You can do it in a system and see the effect of it. The average price does not change the quantity and value changes, obviously. But what if the price changes in the next purchase order? Again, let's do a purchase order at this time. Let's do it for the quantity of two. Right. And then. We're going to do it for Chicago. Instead of a prize of ten dollars, let's do twenty dollars. OK, and then he'd say. Civil disorder. Control copy, Koppio Purchase Order. Go to Emidio and Augustus's against that purchase order, do an item, OK? And Lexy. Let's go back to the material and see what happens. And the material master go back and come again, select the accounting, you click, OK, select Chicago one plant. What happens here? The stock has changed to three, which is right, the first order was for the quantity of one. The second order was for the quantity of two to one, plus two equals three. What's the total value? The total value is a multiplication of sixteen point six seven multiplied by three. Let's see if that is correct. Open a calculator. And say sixteen point six seven multiplied by three. That's 50, right? The system seems to have calculated everything right now. The question you might have is how did it arrive at a price of sixteen point six seven, the moving average price? What's the formula used on?