Valuation Units

A valuation unit defines a set of values for the costing attributes defined in the corresponding valuation structure. When you define the valuation structure, you can specify whether the valuation units must be generated automatically.

For example, valuation unit V1 comprises cost organization A and lot L1, and valuation unit V2 comprises cost organization B and lot L2. The processor calculates two different costs for an item, a cost for valuation unit V1 and a cost for valuation unit V2.

The cost processor automatically generates the valuation units if the valuation structure mode is set to Auto or Both auto and manual. You can also manually create valuation units under a valuation structure by using different combinations of the corresponding costing attributes.

Based on the valuation structure type, the valuation unit can be an asset valuation unit, expense valuation unit, or consigned valuation unit.

Manual Valuation Unit

When you define a valuation structure, you can set whether the valuation units must be generated automatically, which is the recommended option, or whether you want to manually define the valuation units. Typically, you would opt to create manual valuation units only if you want to group entities and share a common cost for them.

We'll explore this with an example. Consider you're using average cost method for an item and you've defined the valuation structure at the cost organization, inventory organization, and subinventory level. Also, you've defined the cost organization, inventory organization, and subinventory as listed here:

• Cost Organization - M1

  • Inventory Organization - L1

    • Subinventory - FG

    • Subinventory - WIP

    • Subinventory - MRB

  • Inventory Organization - L2

    • Subinventory - FG

    • Subinventory - WIP

Let's say you've set the valuation unit creation to Auto and you perform a product completion as the first transaction in the subinventory FG. Because a valuation unit doesn't exist for the cost organization, inventory organization, and subinventory combination, the application would create a new valuation unit for this combination. Subsequent transactions for this combination of cost organization, inventory organization, and subinventory will be processed by the cost processor using this valuation unit. This approach is recommended because it has the least manual intervention and, therefore, likely to be error free.

However, let's say you have a requirement to group inventory control attributes to have different costs for different combinations of subinventory. You want to use the same cost for the FG and WIP subinventories but have a different cost for the MRB subinventory. You can then create a manual valuation unit where you attach both the FG and WIP subinventories to the same valuation unit.