Determining the Calculation Method for Transfer Prices

The following costs can be included in an interunit transfer price:

  • Material transfer prices

  • Landed costs

  • Additional transfer costs

Determining the Material Transfer Price

The transfer price includes the material cost of the transferred item determined by the transfer price default hierarchy. Create a cost element with the cost category of Material to be used for the transfer price. The item's default material cost element is stored in the Default Cost Element field in the Define Business Unit Item - General page. Additional material cost elements can be established on the transfer pricing definition or in your PeopleSoft Manufacturing setup.

There are four different methods to value the material portion of an transfer price:

  • At a Transfer Price.

    The system transfers the item using a fixed transfer price.

  • At a Percent Markup of Cost or Transfer Price.

    The system creates the new transfer price by increasing the cost or transfer price of the inventory stock by a percentage markup.

  • At Zero Price.

    The system values the intransit stock at zero. The zero cost method records the entire cost of the stock in the source business unit's interunit transfer gain or loss account. You can use this method for the shipment of promotional or sample items. You can change the default value for the zero price option on the material stock request line using the Material Stock Request - Accounting/Interunit Detail page or the Express Issue - Detail Override/Exceptions page. You can also change the zero price option on the Par Location Definition - Line Details page for issues to the par location.

  • At a value based on the item's cost.

    The system transfers the item using a value based on the item's cost in the source inventory business unit.

Note:

PeopleSoft Cost Management does not support interunit pricing for non-cost items.

Recording Landed Costs

The cost of obtaining inventory stock includes more than just the material costs of the items. Landed costs include some of the charges that are associated with getting items into a warehouse and available for use or sale. In the destination business unit, landed costs are absorbed into the material cost of the item for actual and weighted average items. For standard items, a variance is recorded. For information on setting up landed costs, see the "Structuring Landed Costs" topic.

See Understanding Landed Costs.

Creating Additional Transfer Costs

In addition to the item's material cost and landed costs, you can also record additional transfer fees for an interunit transfer. To define additional transfer costs:

  • Establish a cost element for additional transfer by using the cost category of Addl Trans.

  • Define a fixed cost or percentage markup to calculate the additional transfer cost using the Transfer Pricing Definition component. Additional transfer costs can be defined at the header level or detail level (item ID or item group).

  • Determine if your additional transfer costs should be added to the cost of the item in the destination business unit or written off in an expense account. Select the Expense Transfer Fees check box on the Inventory Definition - Business Unit Definition page to write off the additional transfer costs.

  • Populate the Transfer Price table (CM_TRAN_PRICE) with the transfer prices (material and additional transfer costs) by running the Calculate Transfer Price (CM_TRANS_PRC) process. Additional transfer costs can only be used from the Transfer Price table. The Deplete On Hand Qty (Depletion) process does not calculate additional transfer costs directly from the Transfer Pricing Definition component.

See Applying Transfer Prices to a Material Stock Request.