Example of Overhead Absorption for Interorganization Transfer Return

This is an example of overhead absorption for the interorganization transfer return of a standard costed item.

Let's consider an interorganization transfer return for a standard costed item from the previous example. Note that the interorganization transfer return derives the overhead absorption setting from the corresponding forward flow.

The accounting distributions for this interorganization transfer return with overhead absorption enabled are listed in this table.

Accounting Line Type	Cost Element	Debit	Credit
Inventory	Material		$110.00
Inventory	Overhead		$30.00
Transfer Price Variance	Material		$10.00
Trade In Transit Valuation	Material	$100.00
Trade In Transit Valuation	Overhead	$20.00
Cost Variance	Overhead	$30.00

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		$110.00
Inventory	Overhead		$30.00
Trade In Transit Valuation	Material	$100.00
Trade In Transit Valuation	Overhead	$20.00
Transfer Price Variance	Material	$10.00
Transfer Price Variance	Overhead	$10.00