How Does the Landed Costs Process Work?

A Charge Rule defines how the landed cost functionality works.

You must first set up a charge rule using Charge Rules (CHR). This defines how the landed cost functionality will work.

The following example explains how the process works using a typical scenario of apportioning a purchase invoice with freight charges over a purchase order for goods items.

  1. A purchase order is raised with:
    • Goods item A: quantity 1; cost 200 GBP
    • Goods item B: quantity 1; cost 400 GBP.
  2. Goods are received using the receipt note process.
  3. A purchase invoice is raised for:
    • Goods item A: quantity 1; cost 200 GBP
    • Goods item B: quantity 1; cost 400 GBP.
  4. A transaction is entered in which charge lines have been entered.
    • Freight charge: quantity 1; cost 100 GBP.
    Note: This freight charge may appear on the same invoice as the goods items, or on a separate purchase invoice if a separate organization is used to transport the goods.

    For example, the purchase invoice for the extra freight charges.

  5. In Purchase Invoice Entry, the charge line to be apportioned is selected and highlighted. There may be more than one charge line that requires apportioning.
  6. Select Action > Line > Landed Costs to display the Landed Costs form.
  7. Select the charge rule to be used. This can be set as a default on the Item Master in the Charge Rule field.
  8. Select the lines to apportion the costs over.
  9. Enter the amount to be apportioned. In the charge rule, the value label to be apportioned is defined. This is the maximum amount that can be apportioned and is identified as the 'source' value label. For example, the net value could be 100 GBP, with the tax being 20 GBP and the gross being 120 GBP. Either the net value or the gross value can be used as the maximum amount for apportioning.

    Let's assume that the net value is used, and the net value label is defined in the charge rule as the 'source' value label. Of this 100 GBP, only 70 GBP is to be apportioned and 30 GBP is to be expensed. Of the 70 GBP to be apportioned, 50 GBP is to be apportioned now, and 20 GBP at a later date. The following is entered:

    • Apportion amount = 50 GBP
    • Expensed amount = 30 GBP
    • Suspended amount = 20 GBP.
  10. Apportion the costs manually or automatically. Using the manual method the following values can be entered:
    • Goods item A: apportion 45 GBP
    • Goods item B: apportion 5 GBP.
    Note: You must ensure that Save is selected, and not Exit. If Exit is selected all data entered is lost and must be re-entered. On selecting Save, if everything is correct, the tables are updated and returned to the current transaction automatically. You do not need to select Exit.
  11. Exit Landed Costs.
  12. Apportion the suspended 20 GBP by highlighting the charge line and selecting Action > Line > Landed Costs.

    Only 20 GBP is available for apportioning. Using the above methods apportion 15 GBP: 10 GBP on goods item A and 5 GBP on goods item B. Leave 5 GBP suspended.

    Note: A charge rule does not need to be selected at this stage as processing continues using the charge rule selected earlier.
  13. Exit Landed Costs.
    Note: The effects of landed costs and apportioning are applied once the charge line is closed. Closing a line is forced by performing the last mandatory stage on the purchase or movement transaction type.
  14. Produce Landed Cost costing changes and postings.

    The following is performed:

    1. Any receipts linked to the invoice or order have the costs amended. The actual/latest and weighted average cost on the item cost, receipt cost, receipt line cost, and any allocated issues are updated. In this example:

      • Goods item A = 200 GBP (from step 1) + 45 GBP (from step 10) + 10 GBP (from step 12) = 255 GBP
      • Goods item B = 400 GBP (from step 1) + 5 GBP (from step 10) + 5 GBP (from step 12) = 410 GBP.

      Similar calculations are applied for the weighted average.

      These costs are applied per cost type.

    2. Because the latest/actual and the weighted average have changed, an inventory type of ledger posting occurs to post the difference. Two sets of ledger postings are created, one opposite to the original posting and a new one for the updated inventory costs.
    3. Suspend ledger posting - because 5 GBP is still suspended (from step 12), this is posted to the ledgers. The 'suspended ledger interface' on the Charge Rule is used.
    4. Apportioned ledger posting - the apportioned amount produces a ledger posting for a value of 65 GBP. The 'apportioned ledger interface' on the Charge Rule is used.
Note: Once a charge line is closed, it can never be re-opened and landed costs amended.
Note: Once landed costs have been exited, the apportionment over the various lines cannot be amended. The system allows for no errors when apportioning.