Price indicator

Question

Any one pls explain me about price indicator .Normaly externaly procure materials means we are maintain 'V" price indicator.and inhouse production " s" indicator .         
  apart from this, any other reason is there ?
In case of sub contracting materials means  we have to maintain "s " or " v".
Pls explain  me about MOVING AVG PRICE & STANDARD PRICE.
Thanks in advance.

Answer 1

Hi,
Standard Price Indicator 'S" is used generally in case of Semi-finished ( HALB) / Finished Goods ( FERT) because generally for these type of products Price is likely to remain almost same for longer periods of time.
Moving Average Price Indicator "V" is used in case of Raw materials ( ROH) because their prices are varying in nature. So their price is maintained as Moving Average Price.
Pls. find more details about both the types of prices as below:
Standard Price
Use
The standard price is a valuation procedure in which the current valuation is never affected by goods movements or settlements.
The inventory price as the standard price is set explicitly by a separate function and remains valid until replaced by a new price.
Prerequisites
You have implemented Inventory Accounting.
Features
Inventory receipts and issues are always valuated with the current inventory price. If the value of the business transaction differs from the standard price, the difference is posted to a price difference account.
No actual costs are allocated to the cost objects by goods movements or settlements. This is known as standard costing. The standard costs are compared with the target costs to determine the variances.
Moving Average Price
Use
The moving average price (MAP) is a valuation procedure where the inventory price can change as a result of certain business transactions (goods receipts, GR/IR clearing with externally procured materials, and WIP clearing with materials manufactured in-house).
Prerequisites
You have implemented Inventory Accounting.
You have specified for each material that its inventory price can change like a moving average price.
Features
With the MAP valuation procedure, the external values of the business transactions are assigned to the inventory objects.
·        Inventory receipts
The quantity and value of the inventory receipt are added to the existing inventory. Then a new MAP is calculated based on the relationship between the new inventory quantity and the inventory value. Inventory receipts therefore affect the price.
·        Settlements
Settlement differences are assigned to the inventory. This depends on the stock coverage. Settlements only change the inventory value, never the inventory quantity. Settlements therefore always affect the price.
·        Inventory issues
Inventory issues reduce the inventory value by the value of the issued inventory. If this results in a new price/quantity relationship, the price is adjusted accordingly. Inventory issues rarely use an external value but are normally valuated with the current value/quantity ratio of the inventory object, in other words the current moving average price. For this reason most inventory issues do not affect the price when the moving average price procedure is used.
To keep the price consistent, the valuation procedure needs to change whenever the business transaction encounters unusual situations or missing stock coverage. The following unusual situations are possible:
·        Negative inventory value and negative inventory quantity
Inventory quantities can become negative if the system settings allow it.
·        Document and transaction reversals
·        Pure value postings
Pure value postings normally have base quantities but preserve the quantity situation in inventory. Due to time lags, value postings with high base quantities can encounter low inventory quantities. To protect inventory values from being distorted in such cases, a stock coverage check is performed in which the invoice quantity is compared with the current inventory quantity.
·        Posting to a prior period
Postings to a prior period change the current inventory quantity, value, and moving average price, as well as the inventory quantity, value, and price of the prior period.
Hope this helps clearing your doubt.
Award points if useful.
Regards,
Tejas