P/O Receipt Costing Calculation Method (A57)

Purpose: Use this screen to define how to distribute costs across all items received under the same receipt control number.

Complete this field only if the system control value, P/O Receipt Control # Entered (A56), is selected.

Code field: Enter the code that defines how to distribute costs for freight, duty and import. These costs are factored in during the average costing calculation. Depending on the method you select, certain fields will be required on the Create P/O Receipt Control Screen.

Valid purchase order receipt costing calculation methods are:

• W = WEIGHT

• U = UNITS (Prorating costs by unit is not currently implemented)

• C = CUBE (Prorating costs by cube is not currently implemented)

Averaging costs: If you use the weight method of averaging costs, you must enter the total incoming weight of the shipment on the Create Purchase Order Receipt Control screen.

When a shipment is received, the receiving control number that is assigned represents the total number of purchase orders being received, the total cartons; and the total shipping weight, or the total cubic measurement of the shipment.

The system uses the total weight to determine a cost per pound for the receipts. The cost per pound is added to the purchase cost of each item received in the control group, based on the weight of each item and is included in the average costing calculation for each item. The item weight is defined in the Ship wgt. (Shipping weight) field in Work with Item/SKUs (fast path = MITM).

For example, if the cost per pound for the control group is 1.50 and an item weighs two pounds, an additional amount of 3.00 will be added to the purchase cost of the item when determining the cost at receiving and the new average cost.

Calculating cost:

• the commission percent and duty percent charges defined in Working with Vendor Items (WVNI)

• the brokerage fee and freight charge defined on the Work with Additional Charges Screen (Charges on the Create Purchase Order Receipt Control screen) in Purchase Order Receipts (fast path = PORC)

The system calculates any discounts or surcharges defined in Working with Vendors (WVEN) when the purchase order is created (fast path = MPOE) to determine the net cost:

• the primary vendor discount (the value defined in the Discount % (Primary discount percentage) field)

• additional vendor discounts (Discounts in Work with Vendors)

• the vendor terms discount (the value defined in the Terms field). The Apply A/P Terms Discount Percent at Purchase Order Receiving (D76) system control value must be selected in order for the system to include the vendor terms discount

The net cost is then used to calculate the average cost. See Entering Purchase Orders (MPOE) for more information on how the system calculates the net cost during purchase order entry.

These calculations are used to determine the average cost of an item when additional costs are prorated by weight:

The cost per pound for the control group is determined if brokerage or freight additional charges were defined for the receipt control group on the Work with Additional Charges screen. The cost per pound is calculated as:

 

overhead costs / total weight = cost per pound

 

The cost per pound is then multiplied by the ship weight (defined in the Ship wgt. (Shipping weight) field in Work with Item/SKUs) of the item to determine the additional cost:

 

cost per pound x item/SKU weight = additional cost

 

Any vendor item charges (commission percent or duty percent defined in Working with Vendor Items (WVNI)) and exchange rate conversions (defined in Working with Currency (WCUR)) are calculated to determine the adjusted cost:

 

net cost x rate of exchange x vendor item charges = adjusted cost

 

The New purchase cost is calculated by adding the additional cost to the adjusted cost:

 

additional cost + adjusted cost + net cost = new purchase cost

 

The new purchase cost is used in the average cost calculation:

 

quantity on-hand x old average cost) + (quantity received x new purchase cost) / (quantity on-hand + quantity received) = new average cost

 

For more information: See Purchase Order Receiving Overview.