--- title: Product Costing in the Material Master in SAP S/4HANA description: Learn how to set up product costing in the material master in SAP S/4HANA. Improve your understanding of raw materials, semifinished products, and finished products in the product costing process. image: https://blog.sap-press.com/hubfs/Product%20Costing%20in%20the%20Material%20Master%20in%20SAP%20S4HANA.png --- [![rheinwerk-sappress-logo-header-1](https://blog.sap-press.com/hubfs/rheinwerk-sappress-logo-header-1.svg)](https://blog.sap-press.com/) [Blog](https://blog.sap-press.com) - Books - Get an overview of our books and courses on every relevant SAP topic. - [Programming](https://sap-press.com/programming/) - [Administration](https://sap-press.com/administration/) - [BI](https://sap-press.com/business-intelligence/) - [Finance](https://sap-press.com/finance-controlling/) - [Logistics](https://sap-press.com/logistics/) - [HR](https://sap-press.com/human-resources/) - [CRM & Sales](https://sap-press.com/marketing-sales/) - [HANA](https://sap-press.com/hana/) - [Introductions](https://sap-press.com/introductions/) - [E-Bites](https://sap-press.com/e-bites/) - [Certification Guides](https://www.sap-press.com/certification-guides/) - [Rheinwerk Courses](https://www.sap-press.com/online-courses/) - Book Subscription - Get unlimited access to all SAP PRESS books! - [SAP PRESS Subscription](https://sap-press.com/subscriptions/) [FICO](https://blog.sap-press.com/tag/fico) # Product Costing in the Material Master in SAP S/4HANA ![SAP PRESS](https://blog.sap-press.com/hubfs/Twitter_profile_pic.svg) by [SAP PRESS](https://blog.sap-press.com/author/sap-press) The material master is a foundational master data object for all of logistics in SAP S/4HANA.   All raw materials, semifinished products, and finished products are created as [material masters](https://blog.sap-press.com/what-is-the-material-master-in-sap). Furthermore, services also can be set up as materials.   The material master is a complex structure that consists of numerous views organized into tabs related to sales, purchasing, accounting, product costing, and so on. We’ll focus on the setup required from a costing point of view.   We’ll start with some basic configuration that’s required of materials to enter costing information. Each material is created for a material type, which is used to classify materials with similar functions. For material types relevant for costing, you must activate the costing and accounting views.   To define the settings for material types, follow the menu path **Logistics—General >** **Material Master >** **Basic Settings >** **Material Types >** **Define Attributes of Material Types**.   On the screen shown in the figure below, you’ll see the material types already defined in the system. ![Material Types](https://blog.sap-press.com/hs-fs/hubfs/image-png-Jan-23-2025-06-01-11-8784-PM.png?width=980&height=801&name=image-png-Jan-23-2025-06-01-11-8784-PM.png) **15** The standard material types provided by SAP are shown on this screen; notice that SAP provides myriad standard material types to represent different kinds of materials. When creating custom material types, they should start with Z or Y in the custom name range.   Let’s create our own material type for raw materials. Locate material type **ROH**, which is a standard SAP material type for raw materials, select it, and click the (**Copy As…**) button from the top menu.   The next figure shows the configuration of the material type. Enter “ZRAW” as the name for the new material type and enter “Raw materials” for the long description.   ![Material Type Definition](https://blog.sap-press.com/hs-fs/hubfs/image-png-Jan-23-2025-06-01-34-8073-PM.png?width=687&height=740&name=image-png-Jan-23-2025-06-01-34-8073-PM.png)   In the **User departments** area, you’ll see all the possible views to be maintained on the material master. Make sure that **Accounting** and **Costing** are selected because they provide the required data for financial accounting and product costing. Then, press (Enter) to adopt these settings.   The system issues a message with the number of dependent entries copied for the material type, which you can confirm by clicking the checkmark button, as shown in the following figure. After that step, save the new material type by clicking the **Save** button. ![Copied Dependent Entries](https://blog.sap-press.com/hs-fs/hubfs/image-png-Jan-23-2025-06-01-56-2360-PM.png?width=1475&height=626&name=image-png-Jan-23-2025-06-01-56-2360-PM.png)   To create a new material, follow the application menu path **Logistics >** **Materials Management >** **Material Master >** **Material >** **Create (General) >** **Create (General)**.   The next figure shows the initial screen for material creation. Enter a material number, which can consist of numbers or letters, depending on the number range configuration. You also must select **Industry Sector** and **Material type**. For this example, we’ll select **D Phama & Drugs** and the new material type **ZRAW Raw materials**. Then, proceed by pressing (Enter).   ![Create Material](https://blog.sap-press.com/hs-fs/hubfs/image-png-Jan-23-2025-06-02-19-1711-PM.png?width=870&height=616&name=image-png-Jan-23-2025-06-02-19-1711-PM.png)   On the next screen, shown below, check the views you’re going to maintain in the material master. Make sure the accounting and costing views are selected, then proceed by clicking the checkmark button. **15** ![Select Views](https://blog.sap-press.com/hs-fs/hubfs/image-png-Jan-23-2025-06-02-38-7571-PM.png?width=662&height=877&name=image-png-Jan-23-2025-06-02-38-7571-PM.png)   We won’t detail all the material views, which contain logistical information. We’ll concentrate instead on the accounting and costing views. The next figure shows the **Accounting 1** view, which contains some important settings from a product costing point of view. Most important is the **Prc. Ctrl.** (price control) field, for which you have two options: - **S**: Standard price - **V**: Moving average price/periodic unit price ![Accounting View](https://blog.sap-press.com/hs-fs/hubfs/image-png-Jan-23-2025-06-03-06-7013-PM.png?width=984&height=876&name=image-png-Jan-23-2025-06-03-06-7013-PM.png)   If a material has a standard price (**S**), the value of the material is calculated at this standard price. If goods movements or invoice receipts (IRs) have a price that is different from the standard price, those differences are posted to the price difference account. The variance isn’t taken into account in inventory valuation. If, however, the material has a moving average price, each goods movement and IR updates its price. When goods movements and IRs are posted with a price that’s different from the current moving average price of the material, the differences are posted to the stock account itself. Therefore, the moving average price and the inventory value change.   We recommend using standard prices for finished and semifinished products. The moving average price can be used for raw materials and external purchases. Especially when the price could vary significantly, the moving average price is recommended. Also, in some countries where prices can fluctuate significantly, especially in an inflationary environment, the moving average price is recommended—and sometimes even legally required.   This choice is a major decision point and important strategy in each [SAP S/4HANA](https://learning.sap-press.com/sap-s4hana) implementation that affects how to value inventory. Each type of material should be carefully considered, and your business should make a well-informed decision with the help of its integration partner. Making good decisions for all materials is important because the valuation of the materials provides the backbone for proper product costing. In this process, you must understand what types of materials are used as raw, semifinished, and finished materials. You also must understand the specifics of these materials, how they are affected by market price movements, and how stable their prices are. An important consideration is the economy in which the company operates and whether inflationary forces are in play.   Next, navigate to the **Costing 2** view of the material, as shown here. ![Costing View](https://blog.sap-press.com/hs-fs/hubfs/image-png-Jan-23-2025-06-03-38-6716-PM.png?width=979&height=889&name=image-png-Jan-23-2025-06-03-38-6716-PM.png)   Under this tab, in the **Standard Cost Estimate** section, you’ll maintain the standard cost estimate, which is used to valuate materials with standard price control. Sections exist for future, current, and previous prices, which currently are empty because we haven’t costed the material yet.   Editor’s note: This post has been adapted from a section of the book [*Configuring SAP S/4HANA Finance*](https://www.sap-press.com/configuring-sap-s4hana-finance_5920/?utm_source=sappressblog&utm_medium=referral&utm_campaign=Blogs&utm_term=2620_section16&utm_content=2620) by [Stoil Jotev](https://www.linkedin.com/in/stoiljotev/). Stoil is an SAP S/4HANA FI/CO solution architect with more than 25 years of consulting, implementation, training, and project management experience. He is an accomplished digital transformation leader in finance. Stoil has delivered many complex SAP financial projects in the United States and Europe in various business sectors, such as manufacturing, pharmaceuticals, biotechnology, chemicals, medical devices, financial services, fast-moving consumer goods (FMCG), IT, public sector, automotive parts, commodity trading, and retail.   This post was originally published 12/2023 and updated 12/2024. ## Recommendation [![Configuring SAP S/4HANA Finance](https://blog.sap-press.com/hs-fs/hubfs/social-suggested-images/2620-Dec-30-2024-11-27-21-1324-PM.jpg?width=170&name=2620-Dec-30-2024-11-27-21-1324-PM.jpg)](https://www.sap-press.com/configuring-sap-s4hana-finance_5920/?utm_source=sappressblog&utm_medium=referral&utm_campaign=Blogs&utm_term=2620_section16&utm_content=2620) **Configuring SAP S/4HANA Finance** Starting a new SAP S/4HANA Finance implementation? Get it right the first time! From setting up an organizational structure to defining master data, this comprehensive guide to configuring SAP S/4HANA Finance walks you through each key task. Follow step-by-step instructions organized by functional area: general ledger, accounts payable and receivable, margin analysis, group reporting, and more. Customize SAP S/4HANA to meet your FI/CO needs! [Learn More](https://www.sap-press.com/configuring-sap-s4hana-finance_5920/?utm_source=sappressblog&utm_medium=referral&utm_campaign=Blogs&utm_term=2620_section16&utm_content=2620) ![SAP PRESS](https://blog.sap-press.com/hubfs/Twitter_profile_pic.svg) **by [SAP PRESS](https://blog.sap-press.com/author/sap-press)** SAP PRESS is the world's leading SAP publisher, with books on ABAP, SAP S/4HANA, SAP IBP, intelligent technologies, SAP Business Technology Platform, and more! 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