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