Average and latest purchase prices for subcontracted products

In product subcontracting, components are delivered to a subcontractor, who performs one or more operations and returns the finished product. To distinguish between invoices for product subcontracting and standard purchasing, you can track average purchase prices and the latest purchase prices for subcontracted products separately. This enables more accurate cost accounting.

In the Purchase Order Parameters (tdpur0100m400) session, you must select how the average purchase price of subcontracted products is calculated.

Consider this example:

For an item A:
  • The total quantity received into the warehouse = 100 pieces
  • The current inventory = 5 pieces
  • The average price per piece = 10 euro
  • A new piece is received into the warehouse and the invoice is approved for 1 piece at 15 euro.
If the Method of Calculating Average Purchase Price - Product Subcontracting field is set to:
  • Cumulative Purchases:

    New average purchase price = (100*10) + (1*15)/(100+1) = 10.05 euro per piece

  • Current Inventory:

    New average purchase price = (5*10)+(1*15)/(5+1)=10.83 euro per piece

In the Landed Costs Parameters (tclct0100m000) session, you must select how the average landed cost of subcontracted products is calculated.

If Sites is Active in the Implemented Software Components (tccom0100s000) session, you can also specify these settings by site in the Procurement Settings by Site (tdpur0111m000) session.

If you specify a different purchase price for a subcontracted product on a purchase order line, you can update the average purchase price. After specifying the price and selecting the Subcontracted check box in the Purchase Order Lines (tdpur4101m000) session, you can process the purchase order and purchase invoice. For more information, see:
  • Purchase Order Procedure
  • Processing purchase invoices
  • Matching purchase invoices manually

While matching the purchase order lines in the Match Purchase Order Lines (tfacp2541m000) session, you can select the Update Average/Last Purchase Price check box. After this invoice is approved, you can view the updated average purchase price for the subcontracted product in the Purchase Prices - Product Subcontracting section, in the Item - Purchase (tdipu0601m000) session.