Question no 4131 : Effective Price Calculations

In SAP Material Management as at S/4 1909, Effective Price Calculation in "Info Record List Display Report" includes/considers which of the following?

(more than one answers)

A) Freight costs.
B) Discounts.
C) Customs and Duties (Taxes).
D) Surcharges
E) All of the above.
.

Answer: A, B, C, D, E

Effective price calculation in SAP MM determines the actual procurement cost of a material by adjusting the gross price with discounts, surcharges, freights, and taxes. It serves as the baseline for evaluating price variances against the Material Master and drives accurate accounting entries at Goods Receipt. 

Key Price Tiers:

• Gross Price: The base price of the material before any deductions or additions.
• Effective Price: The resulting price after deducting all discounts (cash, quantity, special) and adding surcharges.
• Net Price: The final payable amount. Calculated by taking the Effective Price and adding delivery costs (freight), packaging costs, and relevant taxes.

Price Calculations example:

• Purchase Order for a Material with Quantity of 100 units
• Gross Price: $10.00 per unit 
• Standard Discount (2%): -$20.00 (2% x $1,000)
• Surcharge: +$70 fixed amount
• Freight Charge: +$50.00 fixed amount
• Tax: 10% based on Gross Value
• Payment Term Cash Discount (2% in 30 Days)

• Gross Value: Gross Price × Quantity 
• Gross Value: $10.00 per unit x 100 units 
• Gross Value: $1,000.00 (or $10.00 per unit)

• Net Value: (Gross Price × Quantity) - Discounts + Surcharges
• Net Value: ($10.00 per unit x 100 units) - (2% of $1,000) + ($70)
• Net Value: $1050.00 (or $10.50 per unit)

• Effective Value: Gross Value - Standard Discounts + Surcharges + Freight + Taxes - Cash Discount
• Effective Value: $1,000 - $20 + $70 + $50.00 + (10% x $1,000) - (2% of $1050)
• Effective Value: $1,179.90 ($11.79 per unit)

Payment Term Cash Discount via standard condition type SKTO condition type (based on the Payment Term agreed with the Vendor) for cash discounts is included in the pricing schema on a purely statistical basis. It calculates the discount amount for informational purposes but does not alter the actual net price, effective price, or inventory value. Payment Term Cash Discounts are (usually) only considered when actual payment to the Vendor is done within the Payment term stipulated Days to enjoy that Cash Discount; therefore only effectively "Gain" at the point of Actual payment. 

Important Note: in SAP MM, the Calculation Schema (Pricing Procedure) dictates how the system computes the final procurement price. It defines the exact sequence of conditions (such as gross price, discounts, freight, and taxes), the mathematical operations (addition or subtraction), and the subtotals required to arrive at the final net or effective price. Therefore, the derivation of price values are configurable based on the company requirements.