Add-on charge
An add-on charge (AOC) is a cost or allowance that you apply to the total cost of a purchase order, ERS receiver, or invoice to pass the cost or allowance on to the customer.
An added cost increases the total cost of a purchase order and an added allowance lowers the total cost of a purchase order. You can apply an add-on charge at the line or header level of a purchase order.
The following table shows you three methods in which you can apply add-on charges and allowances to a purchase order.
| Type of Add-on Cost | Description |
|---|---|
| Miscellaneous Add-on Costs |
Attach miscellaneous add-on cost or allowance to the purchase order header and apply to the entire purchase order. The amount you are adding can be an amount or a percentage of the total unit for the purchase order. |
| Add-on cost (AOC) Spread |
AOC spread is a purchase order header option that can be used to spread or divide add-on costs or allowances over the existing lines on a purchase order when you add the spread.
Note: AOC spread can only be added or maintained after you select the Add form action to add the purchase order to the database.
|
| Item Add-on Costs | Item add-on costs and allowances are expenses attached to the purchase order line. |
For example, freight charges are costs that you normally pass on to the customer. You apply the freight charge to the total cost of the purchase order as an add-on charge.
Other examples of add-on charges that are typically added to a purchase order are insurance, handling charges, and shipping charges. You can also add value-added costs to purchase orders, such as production costs and art and design costs.
Add-on charges that you establish as an add-on charge spread or an item add-on charge for inventory items are typically landed add-on charges. A landed add-on charge means that the AOC is included in the inventory value. When inventory is updated for a non-standard cost company, the inventory is valued at the cost plus add-on charges. For more information, see the Invoice Matching User Guide.
The Purchase Order application posts journal entries for the value of the add-on charge to the inventory account defined for the item master. If the items are no longer in inventory, it will be posted to your inventory variance account.