About Extra Charges

An extra charge is similar to an item charge, in that it gives you the ability to include the value of additional cost components in the unit cost of a received item. Such costs can, for example, be freight, insurance, handling, or other costs related to the item.

An extra charge can be used:

• To identify the landed cost of an item for making more accurate decisions on how to optimize the distribution network.
• For breaking down the unit cost of an item for analysis purposes.
• To include purchase allowances in the unit cost.

Extra Charges and Item Charges

While an extra charge has the same fundamental purpose as an item charge, there are some features of extra charges that are unique. Standard item charges are posted when a transaction line is invoiced. This can be a problem if items are already received and used before they have been invoiced.

For example, a food distribution company may purchase food items from a vendor, then resell these items to customers. Because of the perishable nature of the product, the purchased items are resold within a few days of purchase, before they are invoiced by the vendor. In this scenario, if the user wants to include any additional cost components when determining a sales price, waiting until the items have been invoiced will be too late.

Extra charges are posted along with an inbound item's receipt, rather than upon invoicing. This gives you the ability to factor additional costs into an item's overall cost as soon as the item enters inventory.

Due to the fact that the need to augment an item's cost prior to invoicing is applicable solely to inbound activities, extra charges are only available for assignment on purchase and transfer documents, whereas item charges can also be assigned to sales transactions.

Extra Charge Allocation

Because they impact the cost of specific items, extra charges must be assigned at the document line level. While you can manually assign extra charge amounts to individual document lines, it is also possible to assign an extra charge to a document, then allocate the extra charge amount amongst the lines according to a specified allocation method, such as the document lines' quantities or dollar amounts. This gives you the ability to take an additional cost amount that applies to the document as a whole, then quickly break it out amongst the lines in a way that makes sense.

It is important to note that extra charges must be assigned to individual document lines if they are to impact a received item's posted cost. If you assign an extra charge to a purchase or transfer order, then post the receipt without allocating the charge, the extra charge amount will not be factored into the cost of the received items.

Vendors

An extra charge must be assigned to the document to which it applies. This is unlike an item charge, which can be entered on a separate document from the items it is applied against, then linked to these items.

The user can, however, assign a vendor number to an extra charge that has been assigned to a document. When the lines are received, the program will automatically create a purchase invoice for the relevant vendor for the extra charge amount.

If an extra charge is assigned to a truckload receipt, a vendor can be assigned to this extra charge, as well.

Extra Charge Posting

Extra charges are assigned in the Extra Charge Posting Setup window, which is accessed for a specific combination of general business and general product posting group from the General Posting Setup window. For each extra charge that is assigned to a combination, G/L accounts must be specified for an interim account and a direct cost account. You will not be able to post an extra charge that has been assigned to a document line if these accounts have not been properly set up.

If you intend to use extra charges with transfer orders, you must perform this initial setup for the general posting setup lines that have an assigned general product posting group and a blank general business posting group. Because expected costs are not posted with transfer orders, only a direct cost account should be specified on these lines.

When a purchase line is received, the program posts an extra charge amount to the interim account that has been specified in the Extra Charge Posting Setup window. When the purchase line is invoiced, the program reverses this amount back out of the interim account. The extra charge amount on the purchase line is posted to the direct cost account. This means that it is possible to change an extra charge amount between the time a purchase line is received and invoiced.

Extra charges that have been assigned to transfer orders are posted in a similar manner as purchases. However, because transfer orders are not invoiced, an extra charge will not be posted to an interim account but rather the direct cost account at the time of receipt.

Extra charges are factored into the cost of an item in the Value Entries window. If for example a document line is posted with a cost of $50 and an extra charge amount of $10, the cost amount for the related value entry will be $60. You can obtain a more detailed breakdown of the extra charges that exist for a value entry by selecting the value entry and then opening the Value Entry Extra Charges window.