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SAP Material Management

Subcontracting

Standard Price Assembly

Variances Treatment

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Material : RM

Price $10

Material : Metal

Price $6

Subcontract Service $4

Metal is provided to the Subcontractor who turns the Metal into RM and the Services for that conversion charged by the Subcontractor is $4

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Metal

at

Own

Warehouse

Metal

at

SubCon

Site

Metal transferred to Subcon (no FICO)

Material belong to us

RM

completed item received from Subcon

PO

RM 1

Metal 1 Provided to Subcon

GR of completed RM

GI of assume qty of Metal used

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Material : RM

Price $10

Material : Metal

Price $6

Subcontract Service $4

Generally the Accounting for this Process will be:

Debit $10 ($6 + $4) Material RM

Credit $10 COGS RM

Debit $6 Expenses Metal

Credit $6 Stock Metal

Debit $4 Purchasing RM

Credit $4 GR/IR Accrual RM

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Material : RM

Price $10

Material : Metal

Price $6

Subcontract Service $4

Generally the Accounting for this Process will be:

Debit $10 ($6 + $4) Material RM BSX

Credit $10 COGS RM BSV

Debit $6 Expenses Metal GBB

Credit $6 Stock Metal BSX

Debit $4 Purchasing RM FRL

Credit $4 GR/IR Accrual RM WRX

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Metal

at

Own

Warehouse

Metal

at

SubCon

Site

Metal transferred to Subcon (no FICO)

Material belong to us

RM

completed item received from Subcon

PO

RM 1

Metal 1 Provided to Subcon

GR of completed RM

GI of assume qty of Metal used

Step 1

Subcon PO

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Material Provision to the Subcontractor

Item Category “L” Subcontracting

Subcontract Services for 1 unit of RM2

Step 1

Subcon PO

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Metal

at

Own

Warehouse

Metal

at

SubCon

Site

Metal transferred to Subcon (no FICO)

Material belong to us

RM

completed item received from Subcon

PO

RM 1

Metal 1 Provided to Subcon

GR of completed RM

GI of assume qty of Metal used

Step 2

Metal ready in our warehouse

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Step 2

Metal ready in our warehoues

We have the Metal ready in our warehouse to be send/provided to the Subcontractor

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Metal

at

Own

Warehouse

Metal

at

SubCon

Site

Metal transferred to Subcon (no FICO)

Material belong to us

RM

completed item received from Subcon

PO

RM 1

Metal 1 Provided to Subcon

GR of completed RM

GI of assume qty of Metal used

Step 3

Send Metal to Subcontractor

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This process via ME2O shows the balance of material (Metal) to be provided to the Subcontractor. It then uses movement type 541 to send to vendor stock, it does not have and FICO posting as the stock of metals still belong to us

Step 3

Send Metal to Subcontractor

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This process via ME2O shows the balance of material (Metal) to be provided to the Subcontractor. It then uses movement type 541 to send to vendor stock, it does not have and FICO posting as the stock of metals still belong to us

Step 3

Send Metal to Subcontractor

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This process via ME2O shows the balance of material (Metal) to be provided to the Subcontractor. It then uses movement type 541 to send to vendor stock, it does not have and FICO posting as the stock of metals still belong to us

Step 3

Send Metal to Subcontractor

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This process via ME2O shows the balance of material (Metal) to be provided to the Subcontractor. It then uses movement type 541 to send to vendor stock, it does not have and FICO posting as the stock of metals still belong to us

Step 3

Send Metal to Subcontractor

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Metal

at

Own

Warehouse

Metal

at

SubCon

Site

Metal transferred to Subcon (no FICO)

Material belong to us

RM

completed item received from Subcon

PO

RM 1

Metal 1 Provided to Subcon

GR of completed RM

GI of assume qty of Metal used

Step 4

Metal Stocks at Subcontractor

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0 stocks in our own warehouse

Stocks at

Vendor 1000

Special Stock indicator “O”

Step 4

Metal Stocks at Subcontractor

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Metal

at

Own

Warehouse

Metal

at

SubCon

Site

Metal transferred to Subcon (no FICO)

Material belong to us

RM

completed item received from Subcon

PO

RM 1

Metal 1 Provided to Subcon

GR of completed RM

GI of assume qty of Metal used

Step 5

GR of

Subcon PO

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Step 5

GR of

Subcon PO

101+

GR of RM

completed item by Subcontractor

543-

GI of Metal consumed by Contractor to produce RM

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Generally the Accounting for this Process will be:

Debit $10 ($6 + $4) Material RM BSX (item 1)

Credit $10 COGS RM BSV (item 3)

Debit $6 Expenses Metal GBB (item 6)

Credit $6 Stock Metal BSX (item 5)

Debit $4 Purchasing RM FRL (item 4)

Credit $4 GR/IR Accrual RM WRX (item 2)

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The above materials both RM and Metals are of Moving Average Prices. The Accounting Posting Principle is valid for MAP Materials.

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The above materials both RM and Metals are of Moving Average Prices. The Accounting Posting Principle is valid for MAP Materials.

However, for Standard Price Materials, SAP provide 2 different treatments. (especially when there is a Price Variance)

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Material : RM

Standard Price

Price $10

Material : Metal

Standard Price

Price $6

Subcontract Service $6

Assuming PO Price is $6

The RM Standard Price is $10

In Principle, there is a variance of $2

(Metal at $6 + Subcon Service at $6)

= $12 - RM Std Price of $10

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Material is of

Standard Price

at $10/pc

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Generally the Accounting for this Process will be:

Debit $10 Material RM (RM’s Std Price is used)

Credit $12 COGS RM

Dedit $2 Price Variance RM

Debit $6 Expenses Metal

Credit $6 Stock Metal

Debit $6 Purchasing RM

Credit $6 GR/IR Accrual RM

Generally the Accounting for this Process will be:

Debit $10 Material RM (RM’s Std Price is used)

Credit $10 COGS RM

Debit $6 Expenses Metal

Credit $6 Stock Metal

Debit $6 Purchasing RM

Credit $6 GR/IR Accrual RM

Treatment 2

Price Variance Accounting

Treatment 1

Price Variance absorbed as COGS

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The feature for treatment Price Differences for Subcon PO at GR is available since SAP R3 3.1

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No Price Difference (No Variance Posting)

Generally the Accounting for this Process will be:

Debit $10 Material RM (RM’s Std Price is used)

Credit $12 COGS RM

Dedit $2 Price Variance RM

Debit $6 Expenses Metal

Credit $6 Stock Metal

Debit $6 Purchasing RM

Credit $6 GR/IR Accrual RM

Generally the Accounting for this Process will be:

Debit $10 Material RM (RM’s Std Price is used)

Credit $10 COGS RM

Debit $6 Expenses Metal

Credit $6 Stock Metal

Debit $6 Purchasing RM

Credit $6 GR/IR Accrual RM

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Generally the Accounting for this Process will be:

Debit $10 Material RM (RM’s Std Price is used) BSX (item 1)

Credit $10 COGS RM BSV (item 3)

Debit $6 Expenses Metal GBB (item 6)

Credit $6 Stock Metal BSX (item 5)

Debit $6 Purchasing RM FRL (item 4)

Credit $6 GR/IR Accrual RM WRX (item 2)

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Price Difference (Variance Posting)

Generally the Accounting for this Process will be:

Debit $10 Material RM (RM’s Std Price is used)

Credit $12 COGS RM

Debit $2 Price Variance RM

Debit $6 Expenses Metal

Credit $6 Stock Metal

Debit $6 Purchasing RM

Credit $6 GR/IR Accrual RM

Generally the Accounting for this Process will be:

Debit $10 Material RM (RM’s Std Price is used)

Credit $10 COGS RM

Debit $6 Expenses Metal

Credit $6 Stock Metal

Debit $6 Purchasing RM

Credit $6 GR/IR Accrual RM

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Generally the Accounting for this Process will be:

Debit $10 Material RM (RM’s Std Price is used) BSX (item 1)

Credit $12 COGS RM BSV (item 4)

Debit $2 Price Variance RM PRD (item 3)

Debit $6 Expenses Metal GBB (item 7)

Credit $6 Stock Metal GBB (item 7)

Debit $6 Purchasing Serv. RM BSX (item 6)

Credit $6 GR/IR Accrual RM WRX (item 2)