Price Control for Material Types - Valuation and Account Assignment

Define Price Control for Material Types

There are two types of Price control in the SAP R/3 system:

- V Moving average price/ periodic unit price: price that changes periodically as a result of goods movement and invoice entries. It is calculated by dividing the value of the material by the quantity of the material in inventory. It references the base unit of measure and price unit in the material master records
- S Standard price: constant price at which a material is valuated without taking goods movement and invoices into account

For each material, you must specify the price control indicator in the material master record in Accounting1 view according to which the material is to be valuated.

Standard Setting in the Material Master

Price control is preset as follows in the standard SAP R/3 system:

- Moving average for materials procured externally
- Standard for in-house produced materials

SAP recommends using the presetting for each material type.

Configuration:
IMG Menu :- SPRO - SAP Ref. IMG - Materials Management - Valuation and Account Assignment - Define Price Control for Material Types
Transcation Code :- OMW1

In this setting, we define the default price control for the Material Types:

Material Type	Material Type Desc.	Price Control	Price control Mandatory
FERT	Finished Material	S
ROH	Raw materials	V
SERV	Service Product	S	X
HALB	Semifinished Product	S

In more details:

Moving Average Price :
- Goods Receipt are posted at the goods receipt value
- The price in the material master is adjusted to the delivered price
- Price differences occurs only in exceptional case
- Manual price changes are usually unnecessary. However, they are possible.

If the material is assigned a moving average price (V), the price is automatically adjusted in the material master record when price variance occur. If goods movement or invoice receipts are posted using a price that differs from the moving average price, the difference are posted in the stock account; as a result, the value of the moving average price and the value of the stock change.

The moving average price displayed in the material master record is rounded off. For valuation calculation, the system always uses the exact price (stock value/ stock quantity)

Standard Price:
- All inventory postings are carried out at the standard price
- variance are posted at the price difference account
- variances are updated
- price change can be monitored

If a material is assigned to standard price (S), the value of the material is always calculated at this price. If goods movement or invoice receipts contain a price that differs from the standard price., the differences are posted to a price difference account. The variance is not taken into account in valuation.

Changing the Type of Price control
Under certain conditions, you can change the price control:

From Standard Price to Moving Average Price
You can make this changes any time. The moving average price (which until now has been updated for information purpose only) replaces the standard price and is used for valuation from now.

From Moving Average Price to Standard Price
You cannot make changes in the following two cases:
- If the material master record is set up as a valuation header record for a material subject to split valuation.
- If the standard price comes from costing and is not equal to the moving average price
If the change is possible, the moving average price becomes the standard price, which is then used for valuation.
You change the type of price control by overwriting the price control indicator in the material master record with the new indicator.
Changing the type of price control for a material does not change the value of the material stock, since in both cases the current price becomes the new price.