The application component Actual Costing/Material Ledger fulfills two basic objectives: The ability to carry material prices in multiple currencies/valuations, and actual costing.

A fundamental task of the material ledger is carrying inventories in multiple currencies and/or valuations.

Material inventory values are normally carried by the SAP system in one currency. The material ledger component enables the R/3 System to carry inventory values in two additional currencies/valuations. Therefore, all goods movements in the material ledger are carried in up to 3 currencies or valuations. Currency amounts are translated into foreign currencies at historical exchange rates directly at the time of posting. Businesses such as those in high-inflation countries can therefore carry their inventories in a more stable currency (such as US dollars). This reveals inflationary effects on inventory values.

Actual costing expands upon the functionality of the application components with the purpose of determining actual costs for externally procured materials and materials produced in-house. In addition, actual costing uses actual costs to valuate material inventories, such as raw materials as well as semifinished and finished products.

Actual costing calculates an actual price (periodic unit price) for each material, into which all actual costs for the particular period flow.

When you use actual costing, all goods movements within a period are valuated preliminarily at the standard price. At the same time, all price and exchange rate differences for the material are collected in the material ledger.

Note that the portion of the variance that is to be allocated to consumption can only be allocated to the next-highest production level. If material consumption was assigned directly to a cost center or an internal order, that corresponding portion of the variance cannot be debited to the account assignment object (such as the cost center) and therefore remains in the particular price difference account.
Subsequent allocation of the cost variances to the particular cost objects is not possible within the context of Actual Costing. This is to ensure consistent cost management within a production area.

Work in Process (WIP) is not included in Actual Costing, in other words all materials consumed for a production process within the current month are processed in the withdrawal period, even if part, or all of the delivery of the material to the warehouse takes place in a later period. The actual quantity structure is not adjusted when the WIP determination reposts the withdrawal costs to a WIP account. Any price differences for the consumed materials or activities are, therefore, completelly accounted for in the production for this month.

• If no delivery has taken place, the price difference remain as "not included" in the accounts for the material or cost center.
• If a partial delivery has been made to the warehose, the price differences for all components and activities withdrawn are allocated to this partial delivery. This could lead to an unrealistic actual production price for the finished good.
• Since the quantity structure always contains all of the confirmed activities, differences between the plan and actual prices are only calculated for the delivery for the period concerned. If incorrect deliveries are made, the costs remain assigned to the cost center.

The WIP account is still valuated using the standard prices for the materials and activities consumed. A revaluation using actual prices does not take place.

Revaluating inventories at the end of the period with the periodic unit price is optional. Therefore, the functions of actual costing can not only be used to run actual costing itself, they can also be used for informational purposes in conjunction with other cost accounting systems. The Actual Costing/Material Ledger component therefore does not just collect and calculate actual costs – it also tracks variances from the standard costs.

Due to the ability of actual costing to roll up costs and complete final costing at actual costs, it is particularly interesting for businesses that use a large number of raw materials with production processes that have multiple levels. Businesses that have high inventory levels and are interested in analyzing their inventory and consumption cost variances more closely can also use the functionality of actual costing.

If you use the Actual Costing/Material Ledger component, you must also use Logistics invoice verification because ordinary invoice verification does not support the Actual Costing/Material Ledger component.

Furthermore, the Actual Costing/Material Ledger application component cannot be used with the SAP Industry Business Solution SAP Retail.

If you have activated the material ledger in a plant, you can update valuated goods movements in multiple currencies and valuations.

• Single-level material price determination
• Multilevel material price determination

1. The material ledger is active for the material.
2. The price control indicator in the material’s master record is set to S.
3. The price determination indicator in the material’s master record is set to 3.

The material ledger only supports active ingredient management for transaction-based material price determination.