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Why this Document?


I made this article available since PPL find it challenging and confusing to comprehend the costing and ML flow. Few businesses run and thoroughly analyse regular costs. Few users (and even fewer consultants) are familiar with the specifics of how a standard cost is released. I was working with this BF to address IFRS requirements when I encountered a problem with BF COGM a few months ago that prompted me to write this post.


What will you discover here?


This article aims to clarify the introduction of a new standard cost with ML Active and Production Order GR completed in the previous month after MMPV (in a lighthearted, carefree, and naive manner, as I’m not at work) (LOL, this is in order to complicate a bit more the scenario). This does not serve as a basic ML explanation. I’m assuming you are familiar with terms like PRD PRY PRV, Standard Cost, Controlling Level, and ML Kardex, to name a few.

Many ideas came to me as I was writing the document, so I just wrote it. Don’t expect excellent English from me because it’s not my first language, but I’ll try my best without taking a lot of time.


This document must only be read with a calculator in your hands and lots of coffee! Just kidding, but I do advise you to do the calculations because there is no other way to learn. You will frequently encounter the phrase WHY because I want you to consider how the system functions. You must be familiar with the fundamentals of machine learning.



OK, let’s start:


Imagine you are unfamiliar with the business and the production method. The client requests an explanation of what transpired during the usual cost release.

In my illustration, we’ll examine Periods 04 and 05 of our Unknown Material (I won’t disclose the material’s name here).

After doing ML CLose, this is the CKM3n of the Unknown Material for period 4.

The CKM3N screen for period 05 looks like this:

318,976 is the average cost in per04; take note of this number.


We will introduce a new standard cost of 273,606 in may.


Opening stock = system post doc “change in material price” (new standard – old standard)

= (318,976 – 273,606) * (6977) = 316546488

Why? The system stores the discrepancy between the standard and real valuations in the price difference account since equities are valued at standard cost throughout the month. In my example, the post is between the old and new standards since, at the time of Standard Cost Release (00:01 on May 1st), there was no real cost available.

Make sure there is no price difference in this line (PrelinVal = ActualVal).

Well, the position in FI is

so that the usual cost release reached the BSX Stock Account! So have that in mind. Also keep in mind that UMB represents the distinction between the old and new standards; at this time, actual costs are not relevant.

system post UMB WHY? Since stock is valued at normal cost during the month, a revaluation line must be created. UMB is a P&L account in theory if you don’t work with ML (to make up the balance), but in the next steps, it will be cleared.

Ok, let’s examine the following step:

The system calculates an actual cost of 405219 for the ML Close of April 2004. The End stock is valued at its current price.

Verify that the starting stock of P05 valued at actual cost is 7539.4 * 405219, which equals 3055107944. (rounding error; issue since pricing unit is 1, but fear not; there is another history.)

A further clarification is that 7539.4 is the starting stock of per 2005 at the time of ML Close and not at the time of MMPV. Okay, keep in mind that you frequently conduct ML Close on Days 4, 5, and 10 of the “next month,” and on these days, businesses conduct GM on the preceding month. This is actual life!

The column Price dif stores the difference between the beginning stock’s real cost and the new standard cost, exactly as it does with GM, because ML always values stocks and GM during the period at standard cost.

(405219 – 273606) * 7539.4 = 992282868.

Why? since this is how the system is designed. This price difference is how the system determines the actual cost, including the cost of the initial stock, and it will utilise this information at the ML close in May to determine the true cost and update COGS and Stock.

So, what’s going on in FI?

Gosh, Complicated? in fact not!

  • – With UMB ML Close, UMB in Standard Cost Release and UMB created with PP Gr of per 04 posted in month 05 are cleared.

These are the three PP GR.

316546488 + 9250943 + 7726511 + 8538634 = 342062576 Done! Everything matched!

  • Price discrepancy PRY + PRV equals 129,307,185 + 862,975,683 = 992,282,868.
  • – BSX 650220292 reset the stock price to the preceding month’s average. WHY?

Okay, this procedure is challenging. Because it always refers to the prior standard cost, this is how the system effortlessly matches the stock value of the preceding and next month.

The UMB is clear at this point, and all of the funds are in the Price Difference Account (PRY/PRV). As a result, you may see the stock at Standard Cost, Actual Cost, and Price Difference in the CKM3N initial stock line. Also keep in mind that ML Close post BSX, therefore if you check your balance account, it is valued at standard.

Oh, that’s right! Thus, the equation

Actual cost or value is calculated as follows: Initial assessment + Price differential

is likewise applicable to the starting stock, naturally following the ML closure of the prior period.

The following phase is simple (since this is how ML operates), and all that needs to be done is to confirm that the final stock’s valuation is based on the starting actual stock. The purpose of this is not to describe the entire ML cycle; I assume you are already familiar with it.

The formula is used to determine the real cost of the end-of-May inventory.


3,055,107,944 + 628,843,374 – 652,932,875 = 3,031,018,443

3,031,018,443 / 10,121.300 = 299,469 is the unit cost of the final inventory.

This calculation can be checked on the screen at ok ckm3n.

Arturo Senosain developed the document in June 2013. Share freely, but don’t forget to give credit.


About Me


Product costing is my preferred SAP topic. I mostly operate as a CO-PC and PP consultant. I first heard about ML in 2001, while I was working for a Peruvian firm that made cosmetics. When ML was first introduced, customers had to build their own Z models to analyse COGS. WIP Revaluation is not available. CKMVFM is not real. Despite not majoring in computer sciences, this company has taught me how to develop and debug SAP code and modify it without fear. lovely days.