Purchase Order Return and Sales Return Flows
The cost processor uses FIFO logic to cost purchase order (PO) returns. For sales returns that reference an RMA, the cost processor uses the original sales order cost.
For sales returns that don't reference an RMA, it uses the Unreferenced RMA Receipt Cost option set in the cost profile associated with the item cost profile.
Purchase Order Returns
For PO returns, the cost processor uses the FIFO receipt layer cost to deplete inventory, while it offsets receiving inspection at the acquisition PO price. The difference between the PO price and the FIFO receipt layer cost is booked as cost variance.
This table illustrates several receipts and issues of an item in an inventory organization, followed by a PO return for the same item:
|
Reference |
Transaction Date |
Transaction Type |
Quantity |
Unit Cost |
Receipt Layer Reference |
|---|---|---|---|---|---|
|
Receipt #1 |
01-Jan-2011 |
PO Receipt |
100 |
$120 |
Not applicable |
|
Receipt #2 |
02-Jan-2011 |
PO Receipt |
80 |
$100 |
Not applicable |
|
Receipt #3 |
03-Jan-2011 |
Miscellaneous Receipt |
20 |
$105 |
Not applicable |
|
Issue #1 |
04-Jan-2011 |
Miscellaneous Issue |
-40 |
$120 |
Receipt #1 |
|
Issue #2 |
05-Jan-2011 |
Miscellaneous Issue |
-60 |
$120 |
Receipt #1 |
|
Issue #2 |
05-Jan-2011 |
Miscellaneous Issue |
-15 |
$100 |
Receipt #2 |
|
Receipt #1 |
06-Jan-2011 |
PO Return |
-10 |
$100 |
Receipt #2 |
The cost distribution processor creates the following accounting entries for the PO return:
-
Dr Receiving Inspection $100*10 / Cr Inventory $100*10
-
Dr Receiving Inspection $20*10 / Cr Cost Variance $20*10
Sales Returns
A sales return is costed using the Referenced RMA or Unreferenced RMA option defined in the cost profile associated with the item cost profile.
Any sales return classified as unreferenced in Order Management is costed using the Unreferenced RMA Cost option set in the cost profile. For sales returns classified as referenced in Order Management, they're costed as listed in this table. Here, CO1 and CO2 are cost organizations, IO1 and IO2 are inventory organizations, and BU1 and BU2 are business units.
|
Sales Order Type |
Ship From |
Return To |
RMA Cost Option |
|---|---|---|---|
|
Simple Sales Order |
CO1 - IO1 - BU1 |
CO1 - IO1 - BU1 |
Referenced |
|
Simple Sales Order |
CO1 - IO1 - BU1 |
CO1 - IO2 - BU1 |
Referenced |
|
Simple Sales Order |
CO1 - IO1 - BU1 |
CO2 - IO2 - BU1 |
Unreferenced |
|
Drop Ship |
CO1 - IO1 - BU1 |
CO1 - IO1 - BU1 |
Referenced |
|
Drop Ship |
CO1 - IO1 - BU1 |
CO1 - IO2 - BU1 |
Referenced |
|
Drop Ship |
CO1 - IO1 - BU1 |
CO2 - IO2 - BU1 |
Unreferenced |
|
Drop Ship |
CO1 - IO1 - BU1 |
CO2 - IO2 - BU2 |
Unreferenced |
When you define the cost profile for an item, you can select these options for costing a sales return:
-
Referenced RMA: Sales returns are costed using the original sales order issue cost.
-
Un-referenced RMA: Sales returns are costed based on the value set for the Unreferenced RMA Receipt Cost option set in the cost profile associated with the item cost profile.
-
Existing Item Cost: The RMA receipt is costed using the existing item cost. In the case where a current cost is unavailable, the item is costed with zero cost, if you've setup a default cost element.
-
Price on RMA Order: The RMA receipt is costed using the price entered on the RMA order excluding taxes and recurring charges.
-
Let's consider an example to understand how the sales returns are costed based on these settings. This table illustrates several receipts and issues of an item in an inventory organization.
|
Reference |
Transaction Date |
Transaction Type |
Quantity |
Unit Cost |
Receipt Layer Reference |
Average Cost |
Standard Cost |
|---|---|---|---|---|---|---|---|
|
Receipt #1 |
01-Jan-2011 |
PO Receipt |
100 |
$120.00 |
Not applicable |
$120.00 |
$110.00 |
|
Receipt #2 |
02-Jan-2011 |
PO Receipt |
80 |
$100.00 |
Not applicable |
$110.00 |
$110.00 |
|
Issue #1 |
13-Jan-2011 |
Sales Order Issue |
-40 |
$120 |
Receipt #1 |
$110.00 |
$110.00 |
|
Receipt #3 |
05-Feb-2011 |
Miscellaneous Receipt |
20 |
$140.00 |
Not applicable |
$113.00 |
$115.00 |
|
Issue #2 |
15-Feb-2011 |
Sales Order Issue |
-60 |
$100.00 |
Receipt #2 |
$113.00 |
$115.00 |
|
Issue #3 |
05-Mar-2011 |
Sales Order Issue |
-15 |
$140 |
Receipt #3 |
$113.00 |
$120.00 |
A sales return for the item is initiated and the price on the RMA order is listed in this table.
|
Price Component |
Per Unit Amount |
|---|---|
|
Basic onetime price |
$90.00 |
|
Recurring charges |
$15.00 |
|
Taxes |
$5.00 |
|
Total |
$110.00 |
Based on the settings, let's see how the item is costed on RMA order for different cost methods.
|
Reference |
Transaction Date |
Transaction Type |
Quantity |
Unit Cost Actual Costing |
Unit Cost Average Costing |
Unit Cost Standard Costing |
|---|---|---|---|---|---|---|
|
Referenced RMA of Issue#2 |
20-Feb-2011 |
RMA Receipt |
60 |
$100.00 |
$113.00 |
$115.00 |
|
Unreferenced RMA Cost: Price on RMA Order |
10-Mar-2011 |
RMA Receipt |
5 |
$90.00 |
$90.00 |
$90.00 |
|
Unreferenced RMA Cost: Existing Item Cost |
13-May-2011 |
RMA Receipt |
4 |
$140.00 |
$113.00 |
$120.00 |