SAP CO Material Ledger with First in-first out (FIFO):
How Material Ledger can approach with First in, first out (FIFO) in S/4 HANA 2020 (MM, Production, SD cycle flows)
Balance Sheet Valuation
If the Companies report their Inventory values in different ways.
“Balance sheet” preparation for Legal ,Company policy rules for Internal management objectives also for Tax purpose.
The different ways to value inventory is based on how the policy for inventory valuation treats the inflationary factors in the market.
The most and main approach of nowadays companies following Inventory withdrawal and valuation in SAP is either “First in-first out (FIFO)” and Average Cost Methods
•First in, first out (FIFO):
“FIFO” stands for first-in, first-out, meaning that the oldest inventory items are recorded as consumed if it is RM(procured material), and Sold if it is FG(production material) first. In other words, the cost associated with the inventory that was purchased/Produced first is the cost expensed first.
An approach to inventory management with FIFO method either withdrawal and or valuation procedure in which materials and products are actually withdrawn from stock for sale and or use in the production/process order of their manufacturing (i.e. the first goods received are – or are deemed to be – the first to be issued).
Testing with MM, Production and SD Cycles “Material Ledger with First In, First Out (FIFO)”
1) Raw material (procured from outside) with price control “V” and determination “2”. FIFO Inventory valuation procedure without Actual Costing/Material Ledger execution-CKMLCP in the same period.
2) Raw material (procured from outside) with price control “S” and determination “3”. FIFO withdrawal method and valuation procedure with Actual Costing/Material Ledger execution-CKMLCP in different periods.
3) Finished Product (Internal Manufacturing) with price control “S” and determination “3”. FIFO withdrawal method and valuation procedure with Actual Costing/Material Ledger execution-CKMLCP in different periods.
4) Price difference also allocated to according FIFO withdrawal
5) Exchange rate difference also allocated to according FIFO withdrawal
6) Explain Difference between FIFO-Material Ledger/Actual Costing with normal (Average method) -Material Ledger/Actual Costing Inventory withdrawal, valuation method.