Purchase Orders – Landed Cost
Overview
Ascent ERP has a feature called “Total Landed Cost”. This total landed cost is the total price of a product once it has arrived at a buyer’s door or has been fully manufactured. The landed cost includes the original price of the product, all transportation fees (both inland and ocean), customs, duties, taxes, insurance, currency conversion, packaging, handling and payment fees.
In order to provide flexibility in the calculation of total landed cost, some fees may be fixed price fees, while others may be weight based fees. These fees are recorded at the purchase order header level and then assigned proportionally as follows to each purchase order line when it the PO line is received:
Weight Based Landed Cost – Total weight of received PO line vs. the total weight of the entire purchase order will determine the % of the fees to be applied to the received PO line.
Price Based Landed Cost – The extended price of the line vs. the extended price of the purchase order will determine the % of the fees to be applied to the received PO line.
Finally, the landed cost based calculations respect the cost type configuration of the item master. For example, when an item is configured for average cost, the landed cost type calculations will also be aggregated in the same way when calculating costs at the item master and lot level.
Custom and Admin Settings
For the most part, there is no configuration to turn on the calculation of PO Landed Cost. But there is one Custom Setting, Use PO Landed Cost, which controls how PO Landed Cost is utilized within the rest of Ascent ERP:
Additionally, the Admin Setting Use Lots needs to be Yes in order to track the lot costs:
Create, Rollup of BOM Lines, Bom Depletion Lines, etc.) is used in place of the lot purchase price or cost fields.
For our example, we also have these custom settings enabled:
First Example: Creating and receiving purchase orders that utilizes an item configured as an Average Cost Item:
First setup of an item master to use Average Cost:
After initial setup, notice the Non-Material Cost/Fees is not set. Also, the Net Weight of the item is also not set. Now create and receive a purchase order using the newly created item master:
As can be seen, in the screenshot of the purchase order, a total price based fee of $3.33 has been assigned to the purchase order. Let’s review how receiving the purchase order will impact the received purchase order line, the lot, and the item master:
The received purchase order line:
The first thing that stands out is that there are no recorded weight based fees calculated. This is because no weight was assigned to the item during item setup. So it is very important that if weight based fees are going to be used, that the item master is correctly assigned a proper weight for the item!
The Recorded Price Based Fee is correctly set to $1.11 for the line as this is the only line for the order. The Landed Price is correctly calculated as $7.11. $6.00 purchase price + $1.11 ($3.33 Recorded Price Based Fees / 3 Quantity Received).
Now, the lot level costing calculations:
The total landed cost for the lot is correctly calculated ($7.11 landed cost x 3 items). The Non-Material costs/fee is reflective of the per item fees, so that value is also correct, $1.11 ($3.33/3 items received).
The average cost also continues to reflect the purchase price of the items received on the initial order.
Finally, item master cost calculations:
Now, let’s try a weight-based fee on an Average Cost item, Starfruit. Notice the Net Weight is 1.00 and the Cost is 4.00:
The price is $4.00/ea and the Total Weight-Based Fees is $0.75.
After receiving the PO, we’ll see that on the Item Master, the Non-Material Cost/Fees is $0.25, which is the total PO fees of $0.75 divided by the equity received (3) giving $0.25:
The Received Purchase Order Line shows a Landed Price of $4.25 and a Total Landed Price of $12.75.
Costing and Inventory shows the Price and Recorded Cost of $4.00.
The Lot record shows the Non-Material Cost/Fees of $0.25 and the Total Landed Cost of $12.75.
Second Example: Creating and receiving purchase order that utilizes multiple lines configured with items using standard cost and last cost.
Creation of a new item using cost type: Standard Cost (the Net Weight is 1.00)
Creation of new item using cost type: Last Cost (the Net Weight is 2.00)
Creation of Received Purchase Order with 2 Line Items:
Received Purchase Order Line for Item Persimmon:
NOTE: this ORG is set up to use 2 decimal place pricing, NOT 4 decimal places, so we will be using the 2 decimal place calculations and display.
Recorded Weight Based Fees = (Total Line Received Weight)/Total PO Received Weight) x PO Weight Based Fees = 6.0/9.0 x $9.00 = $6.00
Recorded Price Based Fees = (Total Line Extended Price/Total PO Extended Price) x PO Based Price Fees = ($36/$66) x $10.00 = $5.45
Total Landed Price = Total Line Extended Price + (Recorded Weight Based Fees + Recorded Price Based Fees) = $36.00 + (6.00 + 5.45) = $47.45
Item Master – if you add the weight based fee ($6.00) to the price based fee (5.45), you get $11.45, which, if you divide by the quantity received (3) you get $3.8166, which when rounded, equals $3.82:
Finally, let’s look at the lot record. The Non-Material Cost/Fees are $3.82 (per quantity of 1), the Cost is $12.00:
Received Purchase Order Line for Item Pomegranates:
Recorded Weight Based Fees = (Total Line Received Weight)/Total PO Received Weight) x PO Weight Based Fees = 3.0/9.0 x $1.00 = $3.00
Recorded Price Based Fees = (Total Line Extended Price/ Total PO Extended Price) x PO Based Price Fees = ($30/$66) x $10.00 = $4.54
Total Landed Price = Total Line Extended Price + (Recorded Weight Based Fees + Recorded Price Based Fees) = ($30.00 + (3.00 +4.54) = $37.54 (rounding has taken effect)
Item Master – since this is a standard cost item, nothing gets recalculated:
Finally, let’s look at the lot record. The Non-Material Cost/Fees are $2.52 (per quantity of 1), the Cost is $10.00:
Non Material Cost/Fees = Same as Received PO Line
Total Landed Cost = Same as Received PO Line