The valuation area is the organizational level at which the material is valuated. Plant and company code are two possible valuation areas in the SAP system. When the stock is valuated at the plant level, you can valuate a material in different plants at different prices. When you valuate stock at company code level, the valuation price of a material is the same in all of a company’s plants (that is, in a company code). Valuation at the plant level is mandatory if you want to use either of the Production Planning or Product Cost Accounting components. Maintaining material valuation at plant level allows for different valuation at different plants
The valuation of the material can be done under one of the following areas.
- Company Level
- Plant Level.
When the Company code is set as the Valuation area, the valuation price of the material is same in all plants of the company code.
Material valuation depends on upon the price control procedure set in the material master as below
Moving Average price (V) – The moving average price procedure is used for externally procured material. The Goods Receipt from Purchase Order is posted at Purchase Order price (Quantity X Purchase Order Price). The system modifies the material price in the material master according to delivered price. The system automatically calculates the goods issue by dividing total value by total stock value (that means current price of material). Differences between purchase order price and the invoices are posted directly to the relevant stock account if there is sufficient stock coverage. If sufficient stock of material is not available, then the difference (for balance quantity which is not in stock) is posted to the “Expenses / revenue from price difference”. The data used for cost accounting / controlling purpose, therefore, contains fluctuations. The price can be changed if required, generally at the end of the period. This causes the system to reevaluate the total stock for the valuation area.
Standard Price (S) – The standard price procedure is used for in-house produced material. The system calculates all stock postings at price defined in the material master. Variances are posted to account “Expenses / revenue from price difference”. Exact values are available for cost accounting / controlling purpose. The material price can be changed if required at the end of the period. This causes the system to revaluate the total stock in the valuation area. All goods issues (such as issue to production order) are valuated at a same standard price. This allows better analysis of the cost of production orders. A receipt from Production Order is posted at the standard price.