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:
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Transfer price rule attributes
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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:
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Type: Valid transfer price rule types are Labor and Nonlabor.
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Transfer Price Basis: The basis for transfer price calculation. Transfer price basis options are:
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Raw cost
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Burdened cost
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External recognized revenue
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Calculation Method: Transfer price calculation methods are:
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Basis only: Use the transfer price with no further adjustments.
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Apply burden schedule: Specify the name of an existing burden schedule to apply to the basis.
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Apply rate schedule: Specify the name of an existing rate schedule to apply to the basis.
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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.
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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.
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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 |
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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 |