Structuring Landed Costs

This chapter provides an overview of landed costs and discusses how to:

• Set up miscellaneous landed costs.

• Record estimated landed costs.

• Record actual landed costs.

• Create inventory adjustments and variances for landed costs.

• Review landed cost.

• Adding non-recoverable Indian duties and taxes to the item cost.

Understanding Landed Costs

The cost of obtaining inventory stock includes more than just the material costs of the items. Landed costs include all of the charges that are associated with getting items into a warehouse and available for use or sale, including material, subcontracted services, freight, insurance, duty, taxes, and handling charges. This chapter discusses how to handle all of the landed costs.

PeopleSoft's landed costs feature calculates and accounts for the total landed cost by recording the variances for the difference between the actual invoiced cost and estimated purchase order (PO) cost for:

1. Material costs of the item.

2. Subcontracted services that are included in a production ID in PeopleSoft Manufacturing. This only applied to subcontracted services using actual cost accounting.

3. Other miscellaneous landed costs, such as freight, insurance, duty, taxes, and handling charges.

   Note. PeopleSoft's landed cost feature can be used to record the non-recoverable portion of excise duty, customs duty, and sales tax for India.

These variances can be applied to the system by updating the item's cost (for actual and average cost items) or updating a variance account (for standard cost items).

PeopleSoft's landed costs feature:

• Uses cost elements and miscellaneous charge codes to identify and track each type of landed cost separately or in groups. The material cost of the item is tracked by the material cost element. Other miscellaneous landed costs are tracked by the miscellaneous charge codes and cost elements in the landed cost cost category.

• Displays the estimated landed costs by default on the PO.

• Copies the estimated landed costs from the PO to the receipt where the landed costs are prorated to the individual receipt distribution lines. At putaway, the accrued landed costs are entered into the value of the inventory stock so that the full cost of obtaining the inventory stock is recorded.

• Uses the actual landed costs that are derived from the posted vouchers in PeopleSoft Payables, including all adjustment and reversal vouchers, to calculate variances that update inventory stock values or variance accounts. These variances adjust for changes between estimated and actual landed costs based on fluctuations in both the costs and exchange rates. During voucher entry, material costs and miscellaneous charges can be entered on vouchers that are received from the merchandise vendor or from third-party vendors. The merchandise vouchers must be matched and posted before their actual landed costs are passed to PeopleSoft Cost Management. Third-party vouchers must be posted before their actual costs are passed to PeopleSoft Cost Management.

• Processes the material cost of a subcontracted PO as a landed cost. The subcontracted service must be defined for actual cost. No miscellaneous charge codes are needed for subcontracted services. The estimated cost on the PO is used to record the receipt of the subcontracted service into PeopleSoft Inventory and Manufacturing. Later, when the voucher is entered, matched, and posted, the actual (voucher) cost is used to update the production ID and inventory stock.

• Generates reports to accurately compare estimated versus actual landed costs enabling you to better evaluate supply options.

Consigned items can be set up as landed cost items. When the consigned item is consumed, then the system transacts all accrued landed cost charges.

Note. To use the complete landed cost feature, you must have PeopleSoft Cost Management, PeopleSoft Purchasing, PeopleSoft Inventory, and PeopleSoft Payables installed. To update subcontracted services to actual costs, you must also have PeopleSoft Manufacturing installed and use a cost profile for actual cost.

Setting Up Miscellaneous Landed Costs

Miscellaneous landed costs include costs of obtaining the item, such as freight, insurance, duty, taxes, and handling charges. In order to record miscellaneous landed costs, you must first define several factors. You must decide how to categorize and identify landed costs by using cost elements and miscellaneous charge codes. You can set up the conditions that the system uses to automatically apply miscellaneous landed costs to POs. You must establish how the various miscellaneous landed costs are calculated and prorated to receipt and voucher distribution lines.

To set up miscellaneous landed costs:

1. (Optional) For reporting purposes, you can group similar landed costs together to make reports more readable to users. Use the Landed Cost Group page to create groups for landed costs. For example, air freight and ocean freight components might be grouped into a single freight cost group.

2. Create cost elements with the cost category of landed. Cost elements enable you to account for and report on different types of costs. This enables you to accurately identify each different type of miscellaneous landed costs. Use the Cost Elements page to create cost elements. A landed cost element can be made up of one or many miscellaneous charge codes.

3. Define miscellaneous charge codes (also know as cost components) to define miscellaneous landed costs along with the attributes that identify how and when the landed costs are to be applied, calculated, and prorated. Use the Misc Charge/Landed Cost Definition page to define miscellaneous charge codes. Define which cost element the miscellaneous charge will summarize into.

4. (Optional) If you plan to applying several miscellaneous charge codes to a single PO line, then consider using the landed cost template to group all the related charge codes together and apply them as a group. This feature enables you to quickly apply charge codes and track relationships for future changes to the structure. Use the Misc Chg/Landed Cost Template page to define different collections of miscellaneous charge codes.

5. (Optional) You may tell the system when to apply the miscellaneous charge codes or landed cost templates to a PO. This is done by identifying the properties that must exist on a PO in order to apply the charge codes. Use the Miscellaneous Charges - Miscellaneous page to associate templates or charge codes and specific charge amounts for any combination of item category, item ID, vendor ID, vendor location code, ship-to ID, and purchasing business unit. When one of these item/category/vendor combinations is included on a PO, the system applies the template or charge code, and then calculates and prorates the estimated landed costs to the PO schedule line.

6. (Optional) For items that you wish to define a standard cost profile to be used for analytical purposes.

Note. If you do not need to update landed costs to actual amounts because the estimated costs are accurate, then include the landed costs by using the Additional Item Costs page. Apply the estimated landed costs to the item by simplifying entering the costs by cost element on the Additional Item Costs page. This method does not update inventory values or create variance when the voucher is processed.

See Also

Defining the Cost Foundation for Makeable Items

Using Standard Costing for Purchased Items

Pages Used to Define Miscellaneous Landed Costs

Using the Landed Cost Group Page

To create landed cost groups, use the Landed Cost Group (CM_LC_GROUP_GBL) component.

Access the Landed Cost Group page (Set Up Financials/Supply Chain, Product Related, Cost Accounting, Landed Cost Groups, Landed Cost Group).

For reporting purposes, you can group similar miscellaneous landed costs together to make reports more readable to users. Use the Landed Cost Group page to create groups for landed costs. By setID, enter a group ID and a description. As you define miscellaneous charge codes on the Misc Charge/Landed Cost Definition page, enter the related landed cost group ID. Set the parameters of the reports to view the information by cost group.

Creating Cost Elements

Access the Cost Elements page (Set Up Financials/Supply Chain, Product Related, Cost Accounting, Cost Elements).

Cost elements are used for more than landed cost charges. They identify and categorize all the different components of an item's cost and also define the debit and credit ChartField combinations for accounting entries. Cost elements enable you to report and record costs in different categories. For landed costs, you create one or more cost elements for reporting. When setting up a cost element for landed costs, you must identify its category as landed.

See Also

Using the Cost Elements Page

Defining Miscellaneous Charge Codes

To define miscellaneous charge codes, use the Misc Charge/Landed Cost Defn component (CM_LC_COMPONENT).

Access the Misc Charge/Landed Cost Defn page (Set Up Financials/Supply Chain, Product Related, Procurement Options, Charges/Costs, Misc Charge/Landed Cost Defn).

This page is used to identify both miscellaneous charges and miscellaneous landed cost charges. Landed costs charges are prorated to the PO distribution lines, receipt distribution lines, and voucher lines. A landed cost can be from the merchandise vendor or a third-party vendor.

If you select the Accrue Charge check box, then the estimated landed costs for that miscellaneous charge code are included in inventory value at putaway. If you do not select the Accrue Charge check box, the system waits for the actual landed costs (recorded on the matched and posted voucher) and then records the actual landed costs in an expense account. The non-accrued charges are not included in the inventory value.

Note. PeopleSoft's landed cost feature can be used to record the non-recoverable portion of excise duty, customs duty, and sales tax for India. Define a miscellaneous charge code by using the VAT input non-recoverable type and selecting the Prorate and Landed Cost Component options. The non-recoverable portion is recorded in the item value.

See Also

Setting Up Miscellaneous Charges and Landed Costs

Using Landed Cost Templates

To create a landed cost template, use the Misc Chg/Landed Cost Template component (CM_LC_TEMPLATE).

Access the Misc Chg/Landed Cost Template page (Set Up Financials/Supply Chain, Product Related, Procurement Options, Charges/Costs, Misc Chrg/Landed Cost Template, Misc Chg/Landed Cost Template).

If you plan to apply several miscellaneous charge codes to a single PO or PO line, then consider using the landed cost template to group all of the related charge codes together. You can apply them as a group to the Miscellaneous Charges - Miscellaneous page or directly to the PO by using the Header - Miscellaneous page or the Schedule-Miscellaneous Charges page. This feature enables you to quickly apply charge codes and track relationships for future changes to the structure. Use the Misc Chg/Landed Cost Template page to define different collections of miscellaneous charge codes.

See Also

Defining Miscellaneous Charges and Landed Costs

Designing Charge Codes to be Applied to Your POs

Access the Miscellaneous Charges - Miscellaneous page (Items, Define Items and Attributes, Miscellaneous Charges, Miscellaneous).

In order to have the system automatically populate the POs with the correct miscellaneous charge codes and charge amounts; you must design a series of parameter combinations. When a PO is entered that matches the combination of parameters that you define, the assigned charge code or template is used.

You can set up default miscellaneous charges that are automatically calculated based on these combinations, where level one overrides level two, and so on:

For example, you can set up miscellaneous charges that are automatically calculated on the PO when a certain item is ordered from a particular vendor, for a particular purchasing business unit, and for a specific ship to location of the business unit. You can also set up a miscellaneous charge that is automatically calculated for a particular item.

Only one Miscellaneous Charges - Miscellaneous page combination is used for each charge code. If you define the same charge code at multiple levels, the system uses the Miscellaneous Charges - Miscellaneous page at the most specific level of detail. However, you can define more than one charge code. For example, if you define a miscellaneous charge named shipping for an item (level 4), and also for the category (level 8) that the item belongs to, only the charge that is defined for the item is used. The miscellaneous charge that is defined for the category is only used for items that do not have a miscellaneous charge that is specifically defined for them. However, if you define one charge code (shipping) at the item level and another charge code (handling) at the category/vendor/Purchasing business unit/ship to location, then the PO picks up both the handling and shipping charges.

Miscellaneous Charges Selection Page

Access the Miscellaneous Charges Selection page (Select the Selection Criteria link on the Miscellaneous Charges - Miscellaneous page).

Enter criteria in each field to narrow the search. For example, if you enter only a setID, then all the miscellaneous charges that are set up on the Miscellaneous Charges - Miscellaneous page for that setID are retrieved. If you enter a setID and an item, then all the miscellaneous charges that are set up for that item in that setID are retrieved.

Enter the maximum number of rows that you want to retrieve in the Max Rows field.

See Also

Capturing Item Miscellaneous Charges

Recording Estimated Landed Costs

The PO and receipt in PeopleSoft Purchasing use an estimated cost. The actual cost is not known until the invoice (voucher) is received and processed in PeopleSoft Payables.

POs

Estimated landed costs appear by default on the purchase order:

In all cases, the PO prices can be manually altered before dispatch.

For further information about POs, see PeopleSoft Enterprise Purchasing PeopleBook, "Creating Purchase Orders Online."

See Creating Purchase Orders Online.

Receipts

When the merchandise is received in PeopleSoft Purchasing, the material and other landed cost charges from the PO schedule are copied onto the receipt distribution line. A completed receipt in PeopleSoft Purchasing populates the records, RECV_LN_DISTRIB, RECV_LN_DIST_LC and RECV_LN_SHIP_LC, which are used later by the Landed Cost Extract process to pass data to PeopleSoft Cost Management by using the CM_MATCHED_COST record. For subcontracted services, the production ID information is copied to the receipt line and distribution line. For miscellaneous landed costs, the selection in the Accrue Charge check box on the Misc Charge/Landed Cost Definition page determines if the estimated landed costs are included in the inventory value at putaway or included in expense accounts when they are invoiced.

Once the receipt is recorded in PeopleSoft Purchasing, use the putaway processes in PeopleSoft Inventory to store the item into inventory and record the material and other landed costs.

For subcontracted services, enter the receipt on the Subcontracted Receipt page to complete the subcontracted operation of the production ID. The system records the estimated PO cost or the standard cost, depending on the cost profile of the end item, as a debit to Work in Process (WIP).

See Also

Receiving Shipments

Receiving and Putting Away Stock

Subcontracting

Applying Miscellaneous Charges To Purchase Order Lines

Defining Miscellaneous Charges and Landed Costs

Entering Schedule Miscellaneous Charges

Pages Used to Record Estimated Landed Costs

Recording Actual Landed Costs

The actual landed costs are recorded on the voucher in PeopleSoft Payables. Landed costs (material, subcontracted services, and other miscellaneous landed costs) can be recorded on regular vouchers, adjustment or reversal vouchers, or third-party vouchers. A merchandise voucher must be matched and posted and a third-party voucher must be posted before their actual landed costs can be passed to PeopleSoft Cost Management.

In PeopleSoft Payables, miscellaneous charges can be attached to vouchers as non-merchandise and non-recoverable VAT charges. These non-merchandise charges are freight, sales tax, use tax and miscellaneous charges.

Note. For excise duty, customs duty, and sales tax for India, you must enter the receipt ID on the associated voucher line in order to adjust the inventory value to the actual cost of these charges. Once this voucher (recorded to pay these duties or taxes) is matched and posted in PeopleSoft Payables, the system can calculate and apply any variance between the non-recoverable amount on the voucher and the non-recoverable amount in the item cost.

For further information about recording, matching, and posting vouchers, see PeopleSoft Enterprise Payables PeopleBook.

See Also

Running the Matching Process

Running Voucher and Payment Posting

Creating Inventory Adjustments and Variances for Landed Costs

Once the voucher is matched and posted, the actual landed costs can be sent to PeopleSoft Cost Management. The differences between the estimated and actual landed costs are calculated based on the fluctuations in the cost and the exchange rates. These differences can be applied as adjustments to the item cost for actual or average cost items or can be applied as variances to variance accounts for standard cost items.

To calculate landed cost adjustments or variances:

1. Run the Landed Cost Extract process (LC_EXTRACT) to link the voucher landed costs back to the PO and receipt costs.

   This process retrieves from PeopleSoft Payables the landed costs, including material costs, subcontracted costs, and other miscellaneous landed costs. The miscellaneous landed costs are categorized by the miscellaneous charge codes. Material costs, including subcontracted costs, are categorized by the material cost element. The vouchered costs are recorded into the CM_MATCHED_COST table.

2. Review and correct in exceptions from the Landed Cost Extract process.

3. As needed, manually close any receipt lines or charges that are not fully matched or fully matched but not within the miscellaneous charge code tolerances.

4. For subcontracted services, run the Production Close process (SFS1100) to set the production ID to closed for accounting.

   • For standard cost items, receive the subcontracted PO and complete the operation in PeopleSoft Manufacturing (subcontracted services are on the operations list). The subcontracted service is costed at standard cost. The variance between the standard cost, PO, and voucher amounts are recorded in a variance account and do not update the cost of the subcontracted item.

   • For actual cost items, you also receive the subcontracted PO and complete the operation in PeopleSoft Manufacturing. Once the voucher is posted to CM_MATCHED_COST, the difference between the estimated subcontracted cost on the purchase order and the actual subcontracted cost on the voucher is calculated and flows into WIP and to finished goods. This difference is posted as an adjustment to the subcontracted cost using the transaction group 664 (Subcontracted Cost) in the following step.

5. Run the Transaction Costing process (CM_COSTING) to calculate the variances and cost adjustments. This process is run from the Cost Accounting Creation process page. For actual and average costed items that are produced in PeopleSoft Manufacturing, the Transaction Costing process can calculate the variances for subcontracted services between PO costs and voucher costs.

6. Run the Accounting Line Creation process (CM_ALC) to create accounting entries to record the variances and cost adjustments. This process is run from the Cost Accounting Creation process page.

Pages Used to Create Adjustments and Variances for Landed Costs

Running the Landed Cost Extract Process

Access the Landed Cost Extract process page (Accounts Payable, Batch Processes, Extracts and Loads, Extract Landed Cost, Landed Cost Extract).

The Landed Cost Extraction module links all landed costs from vouchers, POs, and receipts, and passes this data for both material charges and landed cost miscellaneous charges to PeopleSoft Cost Management. The material costs, including subcontracted services, are categorized by the material cost element. The miscellaneous landed cost charges are categorized by the miscellaneous charge codes. This process is separate from the PeopleSoft Payables Matching process (AP_MATCHING), which matches merchandise vouchers with POs or receivers for that merchandise. However, even if you are not using miscellaneous landed costs, you must run this process to pass invoiced material costs to PeopleSoft Cost Management, where the material variances for price and exchange rates are computed and applied.

Note. In order to run Landed Cost Extraction, you must have PeopleSoft Payables, PeopleSoft Purchasing, and PeopleSoft Cost Management installed on the same database. For subcontracted services, you must also have PeopleSoft Manufacturing installed on the same database.

The Landed Cost Extract process does not pass the actual vouchered miscellaneous charges to PeopleSoft Cost Management until all the vouchers are created for the miscellaneous charge codes that are within a particular cost element. This avoids repeated or erroneous changes to the costs within PeopleSoft Cost Management.

Run the Landed Cost Extract process prior to running the Transaction Costing process.

The Landed Cost Extraction program processes inventory items by:

• Flagging eligible vouchers (matched, posted and not yet processed by land cost extract process).

  Eligible vouchers are regular, adjustment, reversal, and third-party vouchers.

• Finding the corresponding receipts (not yet processed by the landed cost extract process) in the RECV_LN_DISTRIB, RECV_LN_DIST_LC, and RECV_LN_SHIP_LC tables.

• Summing the vouchers with the same receiver line information (BUSINESS_UNIT, RECEIVER_ID, RECV_LN_NBR, RECV_SHP_SEQ_NBR).

• Prorating the miscellaneous charges to the receiver lines based on the receiver accepted quantity.

  The voucher line miscellaneous charge will be prorated based on QTY_RECV_APPLIED / sum of QTY_RECV_APPLIED for the voucher line.

• Calculating the material unit costs.

  Note. Life to date voucher amounts will include previously extracted vouchers, in addition to the vouchers selected in the current Landed Cost Extract run control. This helps to ensure accurate calculations of voucher costs by including associated vouchers. For example, a regular voucher and its associated debit memo voucher will be included in the voucher unit cost calculation.

  • CM_UNIT_COST_VO = Life to date RECV_VCHR_MTCH.MERCH_AMT_VCHR (converted to Inventory business unit base currency) / RECV_LN_SHIP.QTY_SH_ACCPT_SUOM.

  • CM_UNIT_COST_POVO = Life to date RECV_VCHR_MTCH.MERCH_AMT_VCHR (converted to Inventory business unit base currency using exchange rate on purchase order) / RECV_LN_SHIP.QTY_SH_ACCPT_SUOM.

  • CM_UNIT_COST_PO = RECV_LN_DIST.MERCH_AMT_BSE / RECV_LN_SHIP.QTY_SH_ACCPT_SUOM.

• Calculating the miscellaneous charge unit costs.

  • CM_UNIT_COST_VO = Life to date RECV_VCHR_MTCH.MERCH_AMT_VCHR (converted to Inventory business unit base currency) / RECV_LN_SHIP.QTY_SH_ACCPT_SUOM.

  • CM_UNIT_COST_POVO =Life to date RECV_VCHR_MTCH.MERCH_AMT_VCHR (converted to Inventory business unit base currency using exchange rate on purchase order) / RECV_LN_SHIP.QTY_SH_ACCPT_SUOM.

  • CM_UNIT_COST_PO = RECV_LN_DISTRIB.MERCH_AMT_BSE / RECV_LN_DISTRIB.QTY_DS_ACCPT_SUOM.

• Populating CM_MATCHED_COST record for material unit costs and miscellaneous charge unit costs by matching receipts and vouchered costs (CM_UNIT_COST_VO, CM_UNIT_COST_POVO, and CM_UNIT_COST_PO).

  One row is created for each cost element of a receiver distribution line.

• Populating CM_MATCHED_COST record for the subcontracted services for a production ID (PeopleSoft Manufacturing).

• Populating CM_MATCHED_COST record for the excise duties, customs duties, and sales taxes for India.

  The process matches the non-recoverable portion of these charges from third-party vouchers (PeopleSoft Payables) to the non-recoverable portion from the POs and receipts (PeopleSoft Purchasing).

• Populating CM_RMATCH_COST record for return to vendor (RTV) adjustment vouchers.

• Populates receiving shipment (RECV_LN_SHIP_VC) and distribution (RECV_LN_DIST_VC) tables with the actual vouchered miscellaneous charges so that you can report and inquire on this data.

• Adds a line to the CM_MATCHED_COST record and the RECV_LN_DIST_LC record with a zero amount if a charge is vouchered which was not on the purchase order to alert analysts of a discrepancy between the expected and vouchered miscellaneous charges.

• Updates the voucher and receiver tables by flagging the processed vouchers and receivers with the landed cost extracted flag.

See Also

Processing Landed Cost Transactions

Reviewing and Correcting the Results of the Landed Cost Extract

When the Landed Cost Extract process is complete:

• Use the Landed Cost Extraction - Messages page to view error messages that are associated with previous landed cost extraction requests.

• If the system encounters exceptions during the Landed Cost Extraction cycle, you can view the exceptions on the Landed Cost Extract Exceptions page. The system generates exceptions if:

  • The high (ceiling) tolerances that are established on the Misc. Charge/Landed Cost Defn page are exceeded. If the low (floor) tolerances are not met, no exception is generated based on the assumption that there are more vouchers to come. An exception does not prevent further processing.

  • Other errors are found beside tolerance exceptions, including no conversion rate or other setup errors.

Correct any exceptions and rerun the Landed Cost Extract process.

See Also

Running the Landed Cost Extract Process

Reviewing Landed Cost Exceptions

Manually Closing Landed Costs

Access the LC Manual Close page (Purchasing, Receipts, Close Landed Costs, LC Manual Close).

Use the LC Manual Close page to manually close receipt lines or charges that will not be fully matched. From this page, you can access a Landed Cost Manual Close-Voucher Detail page displaying all voucher line charges that are allocated to a receipt line charge. The Landed Cost Extract process only passes costs to PeopleSoft Cost Management once miscellaneous charges for cost elements are fully matched. This page lets users manually close charges that are not fully matched.

See Also

Working with Landed Costs on Receipts

Running the Transaction Costing Process for Landed Costs

Access the Cost Accounting Creation process page (Cost Accounting, Inventory and Mfg Accounting, Create Accounting Entries, Cost Accounting Creation).

Given the costs that are passed in from the Landed Cost Extract process to the CM_MATCHED_COST and CM_RMATCH_COST records, the Transaction Costing process makes the necessary cost adjustments or variances for the landed costs. The Transaction Costing process is run from the Cost Accounting Creation process page. Calculations include:

1. For standard cost items, two variances are calculated: purchase price variance (PPV) and exchange rate variance (ERV). Together, the PPV and the ERV make up the total standard cost variance.

   1. The PPV is the difference between the standard cost for the landed cost element and the actual landed costs from the matched, posted, and extracted voucher expressed in the PO exchange rate. Based on the timing of the voucher, the variance could be computed and posted in two parts. If the voucher is not available in the CM_MATCHED_COST record when the Transaction Costing process is run, then the system calculates the difference between the standard cost and the PO price. When the voucher becomes available, then the Transaction Costing process computes the difference between the PO price and the voucher price expressed in the PO exchange rate.

   2. The ERV is the change between the exchange rate for landed costs on the PO and the exchange rate for landed costs on the voucher. This is calculated once the voucher is matched, posted, and extracted to the CM_MATCHED_COST record. An ERV occurs when the invoice for the purchased item is in a different currency than the inventory business unit's currency and the exchange rate between the two currencies changes between the time that you enter the PO and the time that you voucher the invoice.

2. For actual cost items, a cost adjustment is calculated for the difference between the landed costs on the PO and the landed costs on the voucher (that is matched, posted, and extracted to the CM_MATCHED_COST record). This adjustment includes changes in the exchange rate between the PO and voucher. The Transaction Costing process finds the original putaway (in TRANSACTION_INV) and updates the on-hand inventory stock and depletion records for the adjustment. The adjustment is posted based on the ChartField combinations that are used on the original entries.

3. For perpetual weighted average items and retroactive perpetual weighted average items, the cost adjustment (difference between PO price and voucher price including the exchange rate difference) are calculated and applied if the Apply Perpetual Average Adj check box is selected on the Cost Accounting Creation process page. The cost adjustment is added to the on-hand inventory stock. If the cost adjustment is based on more item units than are currently in on-hand stock, then the adjustment is proportionally applied to the on-hand inventory stock and the excess is written off to a write-off account.

4. For periodic weighted average items, the system lets users decide when to perform the calculations on a periodic basis. For the receipts that have been vouchered, the voucher amount is used. On the Cost Accounting Creation process page, select the Apply Perpetual Average Adjs check box to update the perpetual average costs to include price and exchange rate adjustments.

5. The system maintains a full history of all cost changes that are processed for inventory items.

If you select the Accrue Charge check box on the Misc Charge/Landed Cost Defn page, then the miscellaneous landed costs for that miscellaneous charge code are included in inventory value at putaway. When the difference between the PO and the voucher (both cost and exchange rate) are computed, the differences are handled based on the cost method:

If you select the Hold for Final Cost check box on the Cost Profiles page and run the Cost Accounting Creation process for transaction costing in midperiod mode, then the process waits for the matched cost from the invoice to record adjustments to the actual cost items and to record variances for the standard cost items. Costing of receipts and depletions is put on hold until the PO, receipt, and vouchers are matched and in to the CM_MATCHED_COST record, eliminating the need for variances. If you run the Cost Accounting Creation process for transaction costing in Regular mode, all transactions are costed by using the available cost, regardless of this check box setting.

Most vouchers are processed just one time, however, if corrections are necessary the corrected voucher amounts can be extracted and passed to PeopleSoft Cost Management as often as needed. The system is designed to continuously update the costs to the most current information as vouchers are updated.

See Also

Generating Costs for Transaction Records

Calculating and Applying Purchase Price Variance and Exchange Rate Variance

Running the Accounting Line Creation Job for Landed Costs

Access the Cost Accounting Creation process page (Cost Accounting, Inventory and Mfg Accounting, Create Accounting Entries, Cost Accounting Creation).

The Accounting Line Creation job records accounting entries for landed cost differences. This process is run from the Cost Accounting Creation process page. This application engine process retrieves the variances that are computed by the Transaction Costing process (also within the Cost Accounting Creation process page) and creates the accounting entries. These results are stored in the CM_ACCTG_LINE table. The Journal Generator process can then create the journal entries to post to the general ledger system.

If you select the Accrue Charge check box on the Misc Charge/Landed Cost Defn page, then the miscellaneous landed costs for that miscellaneous charge code are included in inventory value at putaway. When the variances are computed, the Accounting Line Creation process creates accounting entries to record the variances.

See Also

Creating Accounting Entries

Reviewing Landed Costs

To review landed costs:

1. Use the Accrued Liability Reconciliation Tool to verify that all differences between the PO costs and the voucher costs are properly accounted for. The entries that are made to this account by PeopleSoft Cost Management should offset the entries that PeopleSoft Payables makes. The reconciliation tool helps identify transactions that are not offsetting for both material costs and other landed costs.

2. Generate PeopleSoft reports to accurately compare estimated versus actual landed costs, enabling you to better evaluate suppliers. Reports include:

   1. Estimated vs. Actual Landed Costs (CMS3000): Lists variances between the PO's price and the voucher's price for all landed cost components.

   2. Total Purchase Variance (CMS3010): Lists variances between the PO (price and exchange rate) and the voucher (price and exchange rate) for all landed cost components.

   3. Standard Purchase Variance (CMS3020): For standard cost items only, lists the variance between the item's standard cost and the PO price that is recognized at the receipt of the item.

See Also

Reconciling PeopleSoft Cost Management and Payables

PeopleSoft Enterprise Cost Management Reports

Adding Non-Recoverable Indian Duties and Taxes to the Item Cost

When you receive raw materials from a vendor, the applicable excise duties, customs duties, and sales taxes (from the vendor excise invoice) can be split into recoverable and non-recoverable parts. The system adds the non-recoverable portion to the inventory value of the raw materials. Later, when you receive the invoice from the vendor and post it into PeopleSoft Payables, any change in the non-recoverable excise duties, custom duties, or sales taxes can be applied to the inventory stock by using the Landed Cost Extract process.

To set up non-recoverable customs duties as a landed cost, read the chapter, "Setting Up Your Customs Duty Structure."

To set up non-recoverable excise duty and sales taxes as a landed cost:

1. Create or identify cost elements with the Cost Category of Landed.

   Cost elements enable you to record and report on each different type of landed cost. Use the Cost Elements page to create separate cost elements for non-recoverable excise duty and non-recoverable sales taxes.

2. Create miscellaneous charge codes to define the non-recoverable excise duty and non recoverable sales taxes.

   The charge codes use the type of VAT input non-recoverable, and select the Prorate and Landed Cost Component check boxes. The cost elements that are defined should be added to the charge codes. Use the Misc Charge/Landed Cost Definition page to define miscellaneous charge codes.

3. Enter the miscellaneous charge codes for non-recoverable excise duty and non-recoverable sales taxes to the corresponding tax components that are defined on the Tax Component page.

4. For each tax rate code, enter the recoverable percentage of the total excise duty or sales taxes in the Recoverable Tax Pct field on the Tax Rate Code page.

   The system calculates the non-recoverable percentage by subtracting the recoverable percent from 100 percent.

5. For items using standard costing, you can use the Additional Item Costs page to include the non-recoverable excise duty and sales taxes as landed costs in the cost rollup.

Non-recoverable excise duty and sales taxes are applied in this manner:

1. The system determines and calculates the excise duty and sales taxes for the PO.

2. When the raw material is received into PeopleSoft Purchasing, the internal vendor excise invoice is recorded with the total excise duty and sales taxes.

3. The Receipt Push process takes the receipt line and matches up the excise duty and sales taxes from the PO schedule line to create the receipt landed costs transactions. The receipt landed costs transactions contain only the non-recoverable portion of excise duty and sales taxes. The Receipt Push process inserts the non-recoverable excise duty and sales taxes into the Putaway staging tables.

4. The receipts (including non-recoverable excise duty and sales taxes) in the Putaway staging tables are then inserted into PeopleSoft Inventory by the Load Staged Items process and the Complete Putaway process.

5. When you receive the vendor's invoice and process it into PeopleSoft Payables, the Landed Cost Extract process passes the difference (if any) between estimated non-recoverable taxes (on the PO) and the actual non-recoverable taxes (on the voucher) to PeopleSoft Inventory, where the item is updated. This process is the same process used for all landed cost adjustments.

See Also

(IND) Processing Excise Duty, Sales Tax, VAT, and Customs Duty for India in PeopleSoft Payables