Purchase Order Processing - Appendix B - Landed Cost

Landed Cost is calculated by the Purchase Order Invoice Entry task (see Invoice Line Item Detail in Purchase Order Invoice Entry). The system automatically allocates any additional charges entered during invoice entry back to each of the line items which were originally received.

The Purchase Order Line Code record contains a "Landed Cost (Y/N)?" flag which controls how any additional amount is allocated back to the original line items.

For “O” (Other) type charges added during invoice entry, the line amount is added to the total allocation if this flag is marked.

For “S” (Standard), “N” (Non-Stock) and “O” (Other) type lines from the original receipt, setting the flag indicates to the system that these items should be included as part of the invoice total for determining the allocation percentage, and that they should be allocated a portion of the additional charges based on quantity or total cost (based on the current parameter setting).

Consider this sample receipt:

Seq	Item	Quanity	Cost	Extension
010	B100	1	85.00	85.00
020	Non-Stock Item	5	1.00	5.00
030	Other PO Receipt	4	2.50	10.00
040	Invoice Charge A			10.00
050	Invoice Charge B			10.00

If all of the landed cost flags are set, then the system will allocate $20.00 back to the first three line items. Using the extended amount as the basis for the allocation:

Seq	Item	Invoice Extension	Percent of Total	Allocated Amount	Landed Cost
010	B100	85.00	85%	17.00	102.00
020	Non-Stock Item	5.00	5%	1.00	1.20
030	Other PO Receipt	10.00	10%	2.00	3.00

If the line code used for Invoice Charge B was set to “N”, then only Invoice Charge A ($10.00) would be allocated.

This second example assumes that the line code for the Other PO Receipt has been set to “N” (exclude from landed cost process):

Seq	Item	Invoice Extension	Percent of Total	Allocated Amount	Landed Cost
010	B100	85.00	94%	18.80	103.80
020	Non-Stock Item	5.00	6%	1.20	1.24
030	Other PO Receipt	n/a	n/a	none	2.50

Computing Landing Cost - Applying a Third Party Freight Bill to a Purchase Order

Purchase Order line codes may be set up to optionally apply the cost of the line item to Landed Cost. Set up a line code with Landed Cost = Y (for example, F for Freight) and another with Landed Cost = N (e.g. O for Other Charges).

During PO Invoice Entry, in the PO detail section, add a Freight (F) line with the freight amount, so it will distribute to the landed cost of the inventory purchased. Add a second, Other (O) line (that won’t affect landed cost) with a negative of the freight amount. This will cause the $ total to the vendor to be correct, yet still distribute the freight to the inventory.

Example: PO Invoice Entry—Purchase Order Line Items

Seq	Cd	Item	Quanity	Cost	Extension
010	S	Bicycle Part	100	6.00	600.00
020	F	Freight to Inventory	1	50.00	50.00
030	O	Freight Paid to Shipper		50.00-	50.00-
					Invoice Total
					600.00

Of course, for expense recording and payment, the invoice for freight must also be entered separately to the shipper.