Paul Ovigele, Ovigele Consulting
Material Ledger’s actual costing functionality is great tool for determining the actual cost of a material on a periodic basis. For those of you who use it, you probably know that it takes all the price and exchange rate differences of a material and post them (proportionally) to the remaining inventory at the end of the period. The main way of analyzing what has happened in the material ledger during the month is by using the material price analysis transaction (CKM3). This shows the beginning inventory, receipts, consumption and ending inventory of a particular material as long as every transaction that contributes to the calculation of the actual cost. Two areas of annoyance with the material price analysis are when it contains the lines “Not distributed” and/or “Not Allocated”.
SAPNote 908776 explains the causes of the “Not distributed” and “Not Allocated” lines, however, many users do not find this note very straightforward to follow and are still confused when these lines show up in their price analysis. I will therefore provide a simple explanation of the concepts:
There a few causes of this (as explained in the SAP Note) but the main one is to do with stock coverage. This means that if the variance in a period is based on a larger quantity than the cumulative inventory quantity for that period, then SAP will only use the proportion of the v ariance that relates to the cumulative quantity to calculate the actual cost. The rest of the variance will be “Not distributed”. For example, if you had a goods receipt of 200 units of a material and 100 units were consumed in the month; and in the next month the invoice receipt was posted for the 200 units but there was a price difference from the invoice of 100 dollars. In material ledger, only 50 dollars (cumulative quantity  divided by invoice quantity  multiplied by price difference ) of the variance will be used in the actual cost calculation for that material. The remaining 50 dollars which is “not distributed” will remain in the price difference account.
Material Ledger passes the variances of a lower-level product, to a higher-level product that it was consumed in (which is called multi-level determination). For example, if you use 30 units of a raw material to make a finished product, and there are 70 units of the raw material left in stock then the system will take 30% (units consumed  divided by cumulative units [30+70]) of the raw material’s variance and pass it to the finished product. However, certain consumption transactions do not contain a higher-level material, for example a goods issue to a sales order, or the consumption of inventory to a cost center. Therefore, the variance of that material is “not included” in any subsequent material. This also means that the receiving object (sales order, cost center, etc) will still be valued at the standard cost when the transaction was performed, and the variance that should have been received from the lower level product will remain in the price difference account.
In my next blog I will demonstrate how to analyz e and resolve these ‘Not Distributed” and “Not Allocated” issues by using the Value Flow Monitor.
For more infrormation on how to optimize your SAP Financials landscape, I've put together my top tips in the book 100 Things You Should Know About Financial Accounting with SAP which is published by SAP Press.