What are Inventory Cost Types?

Inventory Cost Types are used with Landed Costs in order to differentiate the contribution to the total cost of an item of different elements.

For example, goods cost, carriage, insurance and Customs duty. If you are not serialized for Landed Costs a single Cost Type exists by default and collects all the costs.

Inventory Cost Types are created using Inventory Cost Types (ICT), with the individual elements being marked as movement types, and a single inventory type which totals all the individual movement types.

Using Cost Types

You want to track two different cost elements: transportation fees and insurance. Two cost types are set up with a third for the total:

Transportation movement type
Insurance movement type
Total inventory type

You then create two value labels to input this data. These value labels are associated with a cost type:

Transportation value label - transportation cost type
Insurance value label - insurance cost type.

You then create two Charge Rules to enable the input of this data. Each charge rule has a different target value label which corresponds to the value label already created.

Transportation Charge Rule - target value label is Transportation
Insurance Charge Rule - target value label is Insurance.

You record the receipt and apportioning of costs in Purchase Invoice Entry. There may be two separate charge lines, one to cover transportation and one to cover insurance, with two different item codes. These items codes may have default charge rules.

Transportation item of the type charge - Transportation Charge Rule
Insurance item of the type charge - Insurance Charge Rule.

You then call the Landed Costs function twice:

Using Transportation Charge Rule - transportation costs are apportioned.
Using Insurance Charge Rule - insurance costs are apportioned.

The system then performs ledger postings and updates inventory costs as required. The same order or invoice goods line may be selected for apportioning several times, for each charge line within the system being used as the target for landed costs. The inventory costs are updated as such:

Each charge rule is updated with the relevant apportioning amounts.
Each charge rule has a different target value label.
Each value label is associated with a different cost type.
Cost types are recorded on receipts, issues, and item costs.
On the receipts and any associated issues the apportioned amount is added to the relevant cost type.

Note: When landed costs is called from a charge line on an invoice or order, it can only use one charge rule.