Valuation of Materials 
The cost of goods manufactured is composed of material, production, and overhead costs. The material costs are displayed as follows:
In the itemization as items of type M
In the cost component split, in the cost component Material costs
To calculate the material costs, the materials required for production must be determined and valued. In material costing with quantity structure, the materials are determined automatically. In unit costing, you enter the materials manually.
Integration
To value the materials, you can access various prices in the material master record and in the purchasing data, such as the following:
Future, current, or previous standard price
Moving average price
Tax-based or commercial prices 1, 2, 3
Planned prices 1, 2, 3
Quotation and purchase order prices
Prerequisites
In Customizing for Product Cost Planning, you define which price is to be used to value items such as raw materials and purchased parts. To do this, you define a valuation variant and assign it to the costing variant. The valuation variant contains a search sequence that has a maximum of five prices. For the cost estimate, the system searches in the sequence specified for these prices.
For prices from the purchasing info record, enter strategy L and create a separate strategy sequence for prices from purchasing data. You can access various prices, such as net or gross quotation prices, and net or gross order prices. For more information, see Determining the Vendor.
Features
Material Cost Estimate with Quantity Structure
The system first finds a valid BOM and explodes it from top to bottom. It then calculates the costs for the materials in the costing levels with the lowest number. Using the valuation variant and valuation date, the system selects a price for the materials. For further information, see Multilevel BOM, Costing Dates, and Parameters for Quantity Structure Control.
The system then calculates the costs for the materials in the next highest level while including the costs for the materials in the previous level. For further information, see Concept of Cost Rollup.
Note
For materials that have already been costed, you can transfer values from earlier cost estimates provided you have defined the appropriate transfer control ID (see also Use of Existing Costing Data).
For specially-procured materials, you can transfer values from cost estimates in other plants provided you have defined the appropriate transfer control ID.
You can include the results of an additive cost estimate in an automatic cost estimate for the material provided you have made the setting in the valuation variant for additive costs to be included. (See also Additive Costs)
The price for non-stock items is taken directly from the BOM. (See Bills of Material)
Unit Costing (Base Object Costing, Material Costing Without Quantity Structure, Additive Costing):
When you create a unit cost estimate, you enter the costing items manually. For materials, you select item category M. Depending on the valuation variant, the system takes a price from the material master or from purchasing. For further information, see Creation of Costing Items and Valuation of Costing Items.
More Information
Implementation Guide (IMG) for Product Cost Planning
If you use the Material Ledger component, you can find more information about material valuation under Actual Costing/Material Ledger (CO-PC-ACT) in the following sections:
For more information about material valuation, see Material Price Change (MM-IV-MP).