Material price determination determines how the valuation of a material occurs after each business transaction for a material. If SAP Material Ledger is active, this field should be set in the material master with an appropriate combination of price control and material price determination. When SAP Material Ledger is active for a valuation area, additional fields become available in the valuation area view.

The following two price indicator options are available in the material master Accounting 1 view for price determination. The Accounting 1 view contains current valuation data of a material.
Transaction-based (2)
If you select this option, you can choose your inventory price control indicator as V (moving average) or S (standard price). With S, the moving average price is calculated for information purposes only.

1 Transaction-Based Material Price Determination

1.1 Use
This function makes it possible for you to calculate the moving average price after every goods movement.
 If the material ledger is not active, you can only calculate the moving average price in the company code currency.
 If the Material Ledger is active, you can calculate the moving average prices for materials in up to three currencies/valuations.
1.2 Integration
After each valuation-relevant transaction, the system automatically performs price determination to adjust the valuation price of the material and the value of the material stock.
For more information, see Collecting Actual Data for the Material Ledger .
1.3 Prerequisites
If you want to calculate the moving average price in up to three currencies/valuations, check the following settings:
 The material ledger is active for the material.
 The material has material price determination 2 .
 The material has price control indicator V .
Note
If the material has material price determination 2 and price control S , the moving average price is calculated for information only. The material is valuated with the standard price.
1.4 Features
Transaction-based material price determination takes the following amounts into account:
 Price differences
 Exchange rate differences
 Revaluation amounts
The standard price can be calculated statistically for materials having price control indicator V, but it has no impact on the valuation of the material.
Postings for Transaction-Based Material Price Determination
The posting logic of transaction-based price determination corresponds to that of the system without the material ledger. Two accounting documents and a Material Ledger document are created for transaction-based material price determination: one of the accounting documents documents the updating of costs in accordance with the expected material price. The other accounting document documents the distribution of price and exchange rate differences. The Material Ledger document exists as a follow-on document to the material document.

Single/Multilevel (3)
If you choose this option the price control must be S. A moving average or Period Unit Price (PUP) 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.

2 Multilevel Price Determination
2.1 Use
Multilevel price determination calculates the periodic unit price for a material. The standard price, the single-level differences cumulated in the period, the differences between planned and actual prices, as well as input material differences (multilevel differences) are all taken into account. The material price calculated in multilevel price determination can be used for inventory valuation.
For more information on the process flow, see: Periodic Actual Costing .
2.2 Prerequisites
The material ledger is active.
Actual costing is active.
The price determination indicator in the material master is set to 3 .
The price control indicator in the material master is set to S .
Single-level price determination has been performed.
2.3 Features
A level is identified by a material and its associated procurement process . Multiple levels are the result of one material being used in another material. These multiple levels are reflected in the actual BOM that is created in the costing run in the step Determine Sequence .
In multilevel production, both single-level and multilevel price differences exist. If one material is used in another material, and single-level price differences exist for the input material, this results in multilevel price differences. In this way, differences are rolled up from raw materials through semifinished products to finished products. This solves the problem of follow-up costs.

The price calculated through price determination is updated as a periodic unit price (V price) in the Accounting 1 view of the material master record The price control indicator remains set to S . The standard price does not change.
3 Single-Level Material Price Determination
3.1 Use
Single-level material price determination calculates the periodic unit price for a material. The standard price and the cumulative single-level differences of the period are taken into account. The material price calculated in multilevel price determination can be used for inventory valuation. Single-level price determination is a prerequisite for multilevel price determination .
For more information on the process flow, see: Periodic Actual Costing .
3.2 Prerequisites
The material ledger is active.
The price determination indicator in the material master is set to 3 .
The price control indicator in the material master is set to S .
3.3 Features of Single-Level Material Price Determination
A level is identified by a material and its associated procurement process . For a material whose price is calculated through single-level price determination, movements are always valuated at standard price because the price control indicator in the material master record is set to S. Differences between the standard price and the actual price of a valuated transaction are updated in the material ledger.

Single-level material price determination takes into account the differences that arise directly when a material is procured:
 Price differences
These occur when the amount posted for a movement differs from the standard price in the material master record. The following transactions can cause these differences:
 Goods receipts resulting from a purchase order
 Invoice receipts
 Settlement of production orders, process orders, and run schedule headers
 Transfer postings
 Initial entry of stock balances with values
 Free delivery
 Inward movements from consignment stock to the company’s own stock
 Exchange rate differences
These occur when an amount in a foreign currency is translated using different exchange rates. This is the case, for example, when the exchange rate that applies when the invoice is entered differs from the exchange rate that applies when the goods receipt is entered.
 Differences from revaluations
These occur from a credit/debit to a material, a price change, or a posting to a prior period, for example.
The price calculated in price determination is updated as a moving average price in the Accounting 1 view of the material master record The price control indicator remains set to S . The standard price does not change.
3.4 Constraints
Materials whose prices are determined with transaction-based price determination cannot be considered later in multilevel actual costing.
3.5 Note
Note
You must perform single-level material price determination for all materials for each posting period, regardless of whether any material movements have occurred for the relevant materials.

Combinations of Price Control and Price Determination
Price Determination Price Control Indicator S Price Control Indicator V
3 single-/multilevel Standard price(with the moving average price for information) Not an option as the valuation price of the current posting period
If you revaluate the material inventories at the time of the closing entry, the periodic unit price is stored as the valuation price for the closed posting period under price control indicator V.
2 transaction-based Standard price(with the moving average price for information purposes) Moving average price