functionality

Example: Price and Exchange Rate

Differences

Example 1

With the material price analysis, you can interpret how price and exchange rate differences arise under the

category Receipts .

1 Initial inventory

In Period 1, there is a beginning inventory of 10kg of the raw material cocoa in the warehouse that is

valuated with the standard price of 20 Mexican pesos (Mxn).

2 Goods Receipt

In the same period, a purchase order is placed for 20kg of cocoa in the foreign currency US dollars (USD).

The goods receipt of 20 kg of cocoa takes place at a price of 2.1 USD with an exchange rate of 1USD: 10

Mxn. 20 kg of cocoa costs 42 USD or 420 Mxn. 400 Mxn are posted to the material stock account and 20

Mxn to the price difference account.

3 Invoice Receipt

At invoice receipt

a kilogram of cocoa costs 2.2 USD.

The increase in the price of cocoa causes price differences to arise, and fluctuations in the exchange rate (at

invoice receipt 1USD is 11 Mxn) cause exchange rate differences to arise. At invoice receipt 20 kg of cocoa

costs 44 USD or 484 Mxn. At invoice receipt 22 Mxn are posted to the price difference account and 42 Mxn are

posted to the exchange rate difference account.

In the material price analysis, the following values are displayed for Period 1.

Quantity Preliminary

valuation

Price differences Exchange rate

differences

Price

1

Initial inventory

10 kg 200 Mxn 0 0 20 Mxn

Receipts

Procurement

20 kg

20 kg

400 Mxn

400 Mxn

42 Mxn

42 Mxn

42 Mxn

42 Mxn

24.2 Mxn

24.2 Mxn

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2 Goods receipt

3 Invoice

receipt

20 kg

0

400 Mxn

0

20 Mxn

22 Mxn

0

42 Mxn

21 Mxn

0

Other

inward/outward

movements

0 0 0 0 0

Cumulated

inventory

30 kg 600 Mxn 42 Mxn 42 Mxn 22.8 Mxn

Consumption 0 0 0 0 0

Ending inventory 30 kg 600 Mxn

*The price is calculated as follows:

(Preliminary valuation + price differences + exchange rate differences)/ quantity = price

See also:

Displaying Material Price Analysis

Postings:

Postings are made to the following accounts:

No. Periods Inventory Price differences Exchange rate

differences

GR/IR clearing

account

Vendor account

1

2

3

1 200

400 20

22 42 420

420

484

The gross invoice amount without tax is calculated as follows:

2.2 USD/kg * 2.2 USD/kg = 44 USD

Translation is carried out through invoice verification at the current exchange rate:

44 USD * 11 Mxn/USD = 484 Mxn

The price difference in the local currency Mxn at goods receipt is calculated with the exchange rate

at the time of goods receipt:

Price difference at goods receipt = price at goods receipt * goods receipt quantity - standard price* goods

receipt quantity

or

20 Mxn = 420 Mxn - 400 Mxn

or

(2.1 USD/kg *10 Mxn/USD-20 Mxn/kg) * 20 kg = 20 Mxn

The exchange rate difference in local currency Mxn at invoice receipt is the difference between the

valuation of the goods receipt with the old and new exchange rates:



42 USD * ( 11 Mxn/USD 10 Mxn/USD) = 42 Mxn

The price difference in local currency at the time of invoice receipt is the difference between the

invoice amount and the total from the valuation of the goods receipt and the exchange rate:

Price difference at invoice receipt = price at invoice receipt - price at goods receipt - exchange rate difference

or

22 Mxn = 484 Mxn - 420 Mxn - 42 Mxn

The 22 Mxn is the price difference in purchase order currency, in this case USD, translated at the current

exchange rate:

20 kg * 0.1 USD/kg * 11 Mxn/USD = 22 Mxn

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