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Hi Shinu
Let us try learning the basics of FIFO and MAP through a basic example.
Every object in the business world requires to be valuated against money and reported in a fair and equitable manner. Inventories are also objects which require to be valuated. Since many factors affect such valuation in a volatile manner over time valuation becomes a continuous process.
There are many methodologies for valuing inventories out of which FIFO and MAP are two methods.
Let me give you a little example:
You bought an object Yesterday @10 USD and kept it in store. Today you bought one more such piece but @ 12 USD since the market price of the same has increased since.
Let us also assume that you consumed one of the two objects was consumed.
How would you value the item consumed and the item which is still in stock?
The total value of stock prior to consumption of one of the units is
2 SKU (stock keeping units) with a value of 22 USD ( 1 SKU @ 10 USD 1 SKU @ 12 USD )
If issue of 1 SKU happens then the issue is valued @ 10 USD under FIFO method. That would mean that the balance 1 SKU is valued @ 12USD
If you adopt the MAP method you would equi-distribute values across the stock keeping units ( 22 USD / 2 SKU ) as 1 SKU=11USD
Thus values are equi-distributed as Issueof 1 SKU @ 11 USD and the balance of 1 SKU of stock also @ 11 USD.
Hope this is helpful.
Regards
VidhyaDhar
---------------Original Message---------------
From: Shinu
Sent: Friday, September 24, 2010 3:09 PM
Subject: FIFO and Moving average Price ?
> What are the main difference of FIFO and Moving Average price of material valuation in SAP.
> My Client follows FIFO and now in SAP it suggests MAP.
> So now we have to convince the client the merits or advantages of MAP.
>
> Can anyone explian.
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