Except from Practical Guide to SAP Material Ledger by Rosana Fonseca.
The material price determination indicates how the valuation of a material should occur after each business transaction for a material relevant for valuation. If SAP Material Ledger is active, this field has to be set up in the material master using an appropriate combination of price control and material price determination. If SAP Material Ledger is activated for a valuation area, the accounting 1 view looks slightly different than the regular screen without a material ledger. Additional fields become available when using SAP Material Ledger or split valuation.
The following two price indicator options are available in the material master (accounting 1 view) for price determination. Accounting 1 view contains current valuation data of a material.
If you select this option, you can keep your inventory price control indicator as V (moving average) or S (standard price). If the material has price control S, the moving average is calculated for information purposes only, it is not used for valuation as the price control is standard. Materials with the transaction-based indicator option are not considered later in a multilevel actual costing.
If you choose this option, the price control has to be S (standard price). A moving average (period unit price) is calculated at month end. Single/Multilevel price determination allows you to calculate single and multi-level price differences and carry them over through a multiple level manufactured production structure.
An appropriate combination of price control and price determination for a multilevel actual costing is shown in Table 2.1.
Table 2.1: Material price determination
Rosana Fonseca is an independent SAP Financials consultant who has been working in SAP since 1999. She is SAP certified in FI and CO modules and has extensive experience in SAP global projects in the USA, Canada, Europe, UK, Asia, and South America, which includes different industry segments such as Mining, Oil & Gas, Chemicals, Electronics, Energy, Consumer Goods, Telecom, and Aerospace. She is originally from Brazil, but is also a Canadian citizen. She currently lives in Toronto in her adopted country Canada.