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
categoryReceipts.
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.
Quanti Preliminary
ty
valuation

Price
differences

Exchange rate
differences

Price

1
Initial inventory

10 kg

20 Mxn

Receipts
Procurement
2 Goods receipt
3 Invoice receipt

20 kg 400 Mxn
20 kg 400 Mxn
20 kg 400 Mxn
0
0

42
42
20
22

42 Mxn
42 Mxn
0
42 Mxn

24.2
Mxn
24.2
Mxn
21 Mxn
0

Other inward/outward
movements

Cumulated inventory

30 kg

600 Mxn

42 Mxn

42 Mxn

22.8
Mxn

Consumption

Ending inventory

30 kg

600 Mxn

200 Mxn

Mxn
Mxn
Mxn
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. Period Inventor Price
s
y
differences

Exchange rate
differences

GR/IR clearing
account

Vendor
account

1
2
3

200
400

20
22

420
42

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