Example of Overhead Absorption for Purchase Order Return
This is an example of overhead absorption for the purchase order return of a standard costed item.
Let's consider a return of item from the previous purchase order example. Note that the purchase order return derives the overhead absorption setting from the corresponding forward flow.
The accounting distributions for the purchase order return with overhead absorption enabled are listed in this table.
Accounting Line Type |
Cost Element |
Debit |
Credit |
---|---|---|---|
Receiving Inspection |
Material |
$150.00 |
|
Cost Variance |
Overhead |
$20.00 |
|
Inventory |
Material |
$100.00 |
|
Inventory |
Overhead |
$20.00 |
|
Purchase Price Variance |
Material |
$50.00 |
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 |
---|---|---|---|
Receiving Inspection |
Material |
$150.00 |
|
Purchase Price Variance |
Overhead |
$20.00 |
|
Inventory |
Material |
$100.00 |
|
Inventory |
Overhead |
$20.00 |
|
Purchase Price Variance |
Material |
$50.00 |