About extra charges

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

You can use extra charges:

• To identify the landed cost of an item for making more accurate decisions on how to optimise the distribution network.
• To break 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, extra charges have some unique features. 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 and 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 the vendor invoices them. In this scenario, if you want to include any additional cost components when determining a sales price, waiting until the items are invoiced will be too late.

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

Because the need to augment an item's cost prior to invoicing applies solely to inbound activities, extra charges are only available for assignment on purchase and transfer documents. Item charges can also be assigned to sales transactions.

Extra charge allocation

Because they affect the cost of specific items, extra charges must be assigned at the document line level. You can manually assign extra charge amounts to individual document lines. You can also assign an extra charge to a document and then allocate the extra charge amount among the lines according to a specified allocation method, such as the document lines' quantities or dollar amounts. This lets you take an additional cost amount that applies to the document as a whole and quickly break it out among the lines in a meaningful way.

Note that extra charges must be assigned to individual document lines to affect a received item's posted cost. If you assign an extra charge to a purchase or transfer order and then post the receipt without allocating the charge, the extra charge amount is not factored into the cost of the received items.

Vendors

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

You can, however, assign a vendor number to an extra charge assigned to a document. When the lines are received, the program automatically creates a purchase invoice for the relevant vendor for the extra charge amount.

If an extra charge is assigned to a truckload receipt, you can also assign a vendor to this extra charge.

Extra charge posting

Assign extra charges in the Extra Charge Posting Setup page, which you access for a specific combination of general business and general product posting group from the General Posting Setup page. For each extra charge assigned to a combination, specify G/L accounts for an interim account and a direct cost account. You cannot post an extra charge assigned to a document line if these accounts are not properly set up.

If you intend to use extra charges with transfer orders, 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, specify only a direct cost account on these lines.

When a purchase line is received, the program posts an extra charge amount to the interim account specified in the Extra Charge Posting Setup page. 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 you can change an extra charge amount between the time a purchase line is received and invoiced.

Extra charges assigned to transfer orders are posted similarly to purchases. However, because transfer orders are not invoiced, an extra charge is posted directly to the direct cost account at the time of receipt rather than to an interim account.

Extra charges are factored into the cost of an item in the Value Entries page. For example, if 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 is $60. You can obtain a more detailed breakdown of the extra charges for a value entry by selecting the value entry and opening the Value Entry Extra Charges page.