Cost Accounting and Component Exchange between Customer and Company
This document describes the end to end process of component exchange between customer and company from a cost accounting perspective.
Outcome
All steps in the process are complete, the customer is issued with a credit note for the residual value of the core component and the physical component is returned to the supplier and accounted for. A Core is defined as a component or subassembly such as an engine, gearbox, or fuel pump that can be rebuilt or remanufactured and is often available as part of a dealer exchange program.
Process summary
The flow chart describes the complete core process. Actors are customer, dealer and supplier. The process starts when a dealer makes an acquisition of a core to be put into the core fleet. The invoice matching header in the costing model states what the supplier invoice will contain and the inventory accounting header states what the inventory value of the core will be.
In this example:
- 20,000 is the external core charge.
- Once the core exists on an allocatable location at the dealer’s local warehouse it can be allocated to a customer order.
- It is sold with a net price of 225000 + 75000. This is the core charge to the customer.
- When the customer returns the used core to the dealer the inventory value of the core is the external core charge (20000) since that is the amount the dealer can claim from the supplier.
- If the condition of the returned core is lower than expected the inventory accounting price is affected. In this scenario the condition after inspection is partial, meaning that a lower inventory accounting price (10000) is retrieved from the costing element and the core charge to the customer is reduced to 37500. When the customer is credited -10000 will be the cost of the goods sold.
- After the inspection of the return order the core can either be shipped directly to the supplier from the local warehouse or shipped with a distribution order to the central warehouse. The latter is the case with this scenario and on the central warehouse the inspected core items are selected and returned to the supplier with a 'return to supplier' order.
Core costing model
The following figures describe what the costing model of a core may look like. The core charge from the supplier is configured as an external charge using cost operator ’77-core charge supplier’.
Inventory accounting
| Costing element | Amount (dollars) | Comment |
|---|---|---|
| Costing base: Net price | 70000 | Cost of goods |
| Ordering cost | 250 | External charge from the supplier |
| Overhead | 150 | Internal charge |
| Cost for inter-facility transfer | 150 | Internal charge |
| Core charge | 20000 | External charge from the supplier |
| Total for accounting | 90550 |
Invoice matching
| Costing element | Amount (dollars) | Comment |
|---|---|---|
| Costing base: Net price | 70000 | Cost of goods |
| Ordering cost | 250 | External charge from the supplier |
| Core charge | 20000 | External charge from the supplier |
| Total for accounting | 90250 |
Cost Accounting
See for details of the applicable accounting events.