Transfer Price Rules

Create rules to determine how transfer prices are calculated for cross-charge transactions that require borrowed and lent processing or intercompany billing processing. Transfer price calculation can be based on the raw cost, burdened cost, or revenue of the cross-charged transaction.

To set up transfer price rules, you need to understand the following components:

• Transfer price rule attributes

• Transfer price determination logic

Transfer Price Rule Attributes

To create a transfer price rule, you specify the rule name and description, and define these attributes:

• Type: Valid transfer price rule types are Labor and Nonlabor.

• Transfer Price Basis: The basis for transfer price calculation. Transfer price basis options are:

  • Raw cost

  • Burdened cost

  • External recognized revenue

• Calculation Method: Transfer price calculation methods are:

  • Basis only: Use the transfer price with no further adjustments.

  • Apply burden schedule: Specify the name of an existing burden schedule to apply to the basis.

  • Apply rate schedule: Specify the name of an existing rate schedule to apply to the basis.

• Burden Schedule: The burden schedule to apply to the transfer price basis if the transfer price calculation method is to apply a burden schedule. You can select any burden schedule from any set.

• Rate Schedule: The rate schedule to apply to the transfer price basis if the transfer price calculation method is to apply a rate schedule. You can select any rate schedule from any set.

• Markup or Discount Percentage: A rate to apply to the transfer price amount that the rule calculates.

Transfer Price Determination Logic

The following table lists the valid combinations of transfer price basis and calculation methods, and the calculation logic used to determine transfer price amounts based on transfer price rules.

Transfer Price Basis	Calculation Method	Calculation Logic	Transfer Price Transaction Currency
Raw cost	Basis only	Raw cost with no multipliers applied	Same as transaction currency of expenditure item
Raw cost	Apply burden schedule	Burden multipliers are applied to raw cost	Same as transaction currency of expenditure item
Raw cost	Apply rate schedule	If the rate schedule has a markup, the markup is applied to raw cost If the rate schedule has a multiplier, the multiplier is applied to the amount	Currency of the rate schedule
Burdened cost	Basis only	Burdened cost with no multipliers applied	Same as transaction currency of expenditure item
Burdened cost	Apply burden schedule	Burden multipliers are applied to burdened cost	Same as transaction currency of expenditure item
Burdened cost	Apply rate schedule	Rate multipliers are applied to burdened cost	Currency of the rate schedule
External recognized revenue	Basis only	External recognized revenue with no multipliers applied	Regular recognized revenue in ledger currency, which is an attribute of the expenditure item