Adopt selling cost structure - examples

Location A manufactures subassembly 1001 and sells it to location B. Subassembly 1001 is transferred in a warehouse transfer to location B. The intercompany trade scenario is Internal Material Delivery. Location B uses subassembly 1001 to manufacture end item 1101, which is to be sold to an external customer. The table displays the total costs, the cost structure, the total revenue and the intercompany trade profit margin for location A.

Location ASubassembly 1001Cost componentAmount EUR
MaterialMATX100
OperationsOPSX200
SurchargesSURX50
Total COGS350
Revenue500
Intercompany trade profit marginITMRX150

 

The transfer price is EUR 500, which includes the profit margin of EUR 150 for location A. In the following table, the cost component structure of subassembly 1001 is not adopted by location B.

Location BSubassembly 1001Cost componentAmount EUR
Material 1001MAT500

 

If location B adopts the cost structure from location A, a more detailed cost breakdown is displayed for subassembly 1001. In the following table, the intercompany margin cost component ITMRX is specified. ITMRX is part of the effective cost component structure of subassembly 1001:

Location BCost component typeAmount EUR
Subassembly 1001MaterialMATX100
OperationsOPSX200
SurchargesSURX50
Intercompany trade profit marginITMRX150

 

In the following table, ITMRX does not belong to the effective cost component structure of subassembly 1001. ITMRX is of cost component type Material Costs. Consequently, the amount of the intercompany trade margin is aggregated to cost component MATX:

Location BCost component typeCost componentAmount EUR
Subassembly 1001MaterialMATX250
OperationsOPSX200
SurchargesSURX50

 

In the following table, ITMRX does not belong to the effective cost component structure of subassembly 1001. ITMRX is of cost component type Surcharge on Operation Costs. Consequently, the amount of the intercompany trade margin is aggregated in cost component SURX:

Location BCost component typeCost componentAmount EUR
Subassembly 1001MaterialMATX100
OperationsOPSX200
SurchargesSURX200