Example of Overhead Absorption for Miscellaneous Receipt or Subinventory Transfer (Receipt)
This example of overhead absorption for a standard costed item is applicable for miscellaneous receipt transaction and receipt of a subinventory transfer transaction.
Let's consider a miscellaneous receipt for a standard costed item. The cost details are shown in this table.
Cost Element |
Standard Cost |
---|---|
Material |
$100.00 |
Freight Overhead |
$20.00 |
The accounting distributions for this miscellaneous receipt with overhead absorption enabled, which is the default setting, are listed in this table.
Accounting Line Type |
Cost Element |
Debit |
Credit |
---|---|---|---|
Inventory |
Material |
$100.00 |
|
Inventory |
Freight Overhead |
$20.00 |
|
Offset |
Material |
$100.00 |
|
Overhead Absorption |
Freight Overhead |
$20.00 |
However, if you've set the transaction type to not absorb the overhead, then the accounting distributions created are listed in this table.
Accounting Line Type |
Cost Element |
Debit |
Credit |
---|---|---|---|
Inventory |
Material |
$100.00 |
|
Inventory |
Freight Overhead |
$20.00 |
|
Offset |
Material |
$100.00 |
|
Offset |
Freight Overhead |
$20.00 |