Applying Transfer Prices to a Material Stock Request

The Deplete On Hand Qty (Depletion) process uses a default hierarchy to determine the transfer price for each line of a interunit material stock request. In the default hierarchy, the more specific information overrides the more general information. Transfer prices can be derived from:

  1. Override values entered on the material stock request line. If you selected the Allow Price/Markup Overrides check box on the Setup Fulfillment page of the source business unit, then you can change the transfer price on the line.

  2. The Transfer Pricing table. This table includes the material portion of the transfer price and the additional transfer costs. The Deplete On Hand Qty process looks for a transfer price specified for the item ID. This transfer price can be broken up into multiple cost elements. The setup and use of the Transfer Pricing table is optional.

  3. The Transfer Pricing Definition component. If the Transfer Pricing table contains no entry for the specific item ID, then the Deplete On Hand Qty process calculates a transfer price using the data in the Transfer Pricing Definition component.

  4. A value based on the cost of the item. If the transfer price cannot be derived from the transfer pricing definition, then the Deplete On Hand Qty process uses a value based on the item cost.

Details of the Transfer Price Default Hierarchy

The Deplete On Hand Qty process uses the following steps to determine the material transfer price and additional transfer costs included in an item's transfer price:

  1. Use the override values (transfer price, markup percentage, or zero cost) entered on the MSR line using:

    • The Create/Update Stock Request component.

    • The Express Issue component.

    • The Maintain Stock Requests component.

    • The Inventory_Create_Stock_Request, Inventory_Front_End_Shipping, or Inventory_Shipping EIPs.

  2. Find a transfer price for the specific item ID based on the source and destination business unit pair in the Transfer Price table. If no row contains this data, then:

  3. Find a transfer price for the specific item ID in the Transfer Price table for which the source business unit is specified and the destination business unit is blank. If no row contains this data, then:

  4. Use the Transfer Pricing Definition component to calculate the material portion of the transfer price using information defined for the specific source and destination unit pair.

    1. Search for item specific information at the detail level. If no item ID information is found, then:

    2. Search for item group information at the detail level. If no item group information is found and the Price Overrides Only check box has not been selected, then:

    3. Search for header level information (this step is skipped if the Price Overrides Only check box has been selected). If no Transfer Pricing Definition component is defined for the specific source and destination unit, then:

  5. Use the Transfer Pricing Definition component to calculate the material portion of the transfer price using information defined for the specific source unit and a blank destination unit.

    1. Search for item specific information at the detail level. If no item ID information is found, then:

    2. Search for item group information at the detail level. If no item group information is found and the Price Overrides Only check box has not been selected, then:

    3. Search for header level information (this step is skipped if the Price Overrides Only check box has been selected). If no Transfer Pricing Definition component is defined for the specific source unit and a blank destination unit, then:

  6. Use a value based on the item's cost as the transfer price. This value would record just a material portion of the transfer price with no additional transfer costs.

    • For standard cost items, the transfer price is the current frozen standard cost located in the CM_PRODCOST table.

    • For actual cost items, the transfer price is the value in the Default Actual Cost field (DFLT_ACTUAL_COST) in the Define Business Unit Item - General page.

    • For perpetual weighted average items, the transfer price is the current perpetual average cost located in the CM_PERPAVG_COST table. If there is no value in CM_PERPAVG_COST table, then the transfer price is taken from the AVERAGE_COST field in the BU_ITEMS_INV table.

    • For items using Periodic Weighted Average or Retroactive Weighted Average, the transfer price is the value in the Average Purchase Price field (AVERAGE_COST) in the Define Business Unit Item - General page.

Note:

Rounding differences could create a small gain or loss when using the current perpetual average cost (located in the CM_PERPAVG_COST table) as the transfer price.

Related Topics