Entering content frameBackground documentation Actual Costing / Material Ledger Locate the document in its SAP Library structure

Purpose of Actual Costing/Material Ledger


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

Multiple Currencies / Valuations

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.


If you use transfer prices to represent value flows in your company in different valuation views, you must use the material ledger. This allows you to carry your inventories in three different valuations (legal valuation, valuation for reporting purposes, and profit center valuation).



Before activating the material ledger, make sure you know which currencies and valuations you want to use, because you cannot go back and change the setting.


Activating the material ledger is a prerequisite for using multiple valuations.

Actual Costing

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.

Concept Behind Actual Costing

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.

At the end of the period, an actual price is calculated for each material based on the actual costs of the particular period. The actual price that is calculated is called the periodic unit price and can be used to revaluate the inventory for the period to be closed. In addition, you can use this actual price as the standard price for the next period. (See also: Price Changes)

Actual costing determines what portion of the variance is to be debited to the next-highest level using material consumption. With the actual BOM, variances can be rolled up over multiple production levels all the way to the finished product. Additionally, you can choose to have variances from cost centers and business processes also taken into account. (See: Activate Actual Costing).


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.

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.


Valuating the material stock with the periodic unit price provides a method of valuation using actual costs while avoiding problems associated with using the moving average price (see: Price Control With and Without the Material Ledger). Preliminary valuation of goods movements using the standard price makes consistent and reliable cost management of your production process possible while revealing the variances within production. Actual Costing therefore combines the advantages of price control using the standard price with the advantages of using the moving average price. The period dependency of the actual price supports periodic cost management.

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 Ė 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.

By calculating actual prices for materials, actual costing can aid you in making decisions such as whether to manufacture in-house or outsource. Because data is updated at the level of the procurement alternatives in actual costing, it is possible to compare different sources of supply.

Activation Options

If you just want to use the Actual Costing/Material Ledger component to carry material inventory values in multiple currencies/valuations, you must activate the material ledger. In addition, you can choose transaction-based price determination (indicator 'price determination' in material master record = 2). If you do this, you still have the option of deciding between price control standard price and moving average price for your materials. Note the suggestions from SAP regarding this in Price Control with and without the Material Ledger.

If you want the system to calculate a periodic unit price for your materials based on the actual costs incurred in a period, you will need to activate actual costing in addition to activating the material ledger. In addition, you must choose single-level/multilevel price determination for your materials (price determination indicator in material master record = 3). In this case, you must use price control standard price for all materials that you want to use in actual costing.
See also:
Single-Level Material Price Determination
Multilevel Material Price Determination
Periodic Material Valuation
Multilevel Actual Costing

If you want to include variances from cost centers and business processes in addition to the material cost variances in actual costing, you must activate activity consumption update in the quantity structure in addition to activating actual costing (see Activate 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.




Actual Costing/Material Ledger Is Active

The Material Ledger Is Active

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

For more information, see Multiple Currencies and Valuations for Materials.

Caution When you have activated the material ledger, you can choose between the following:

If you want to determine material prices by period, you can choose between the following:

If you want to use single-level material price determination, see the following for more information:

If you want to use multilevel material price determination, see Multilevel Actual Costing.

See also:
Price Control and Material Price Determination

Prerequisites for Periodic Material Price Determination

If you want to execute single-level material price determination for a material, make sure that the following prerequisites are fulfilled:

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

If you want to execute multilevel material price determination, make sure that actual costing is active.




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


See Actual Costing / Material Ledger for detailed background information.

Leaving content frame