Issue  Item Charges - Assigning Freight to Calculate Landed Cost
Solution

Processing Item Charges (Freight Example)

Item charges don't affect item cards or Bill of Materials. (BOM)

Processing Item Charges Entries is as follows:

Setup the Item Charge

Financial Management > Inventory > Setup > Item charges

Note: Make sure you use the appropriate Product Posting group. This will determine which GL account will be affected when posting the freight invoice.


There are 2 ways to process the freight charges:

a. Vendor of the goods also provides the freight

Step 1: Add a line for the freight on the purchase order

Remember to use the following:
Type = Charge (Item)
Qty field = 1
Use the 'Direct unit cost' field to capture the freight cost.

Step 2: Assignment

Select the freight line

Click on 'Line' > Item charge Assignment
 
There are 2 methods to assign the freight charges:

1. Manually
Enter a value in the 'Qty to Assign' field until the 'Rem to Assign' is zero at the bottom of the screen.
 
2. Automatically
Functions > Suggest Item Charge Assignment.

The options are as follows: Equally OR Amount
You can assign the freight charges equally to the item lines it relates to or it can be assigned to the item lines based upon the value for each item line (Pro rata calculation)

The 'Qty to Assign' will be populated based upon the option selected (Equally or Amount) and the freight value ($) will be reflected in the 'Amount Assigned' field.

Step 3: Escape to the Purchase invoice and proceed with posting the document.


b. Vendor of the goods is different than the Freight company

Step 1: Create a separate order for the freight charges.

Remember to use the following in the detail line:
Type = Charge (Item)
Qty field = 1
Use the 'Direct unit cost' field to capture the freight cost.

Step 2: After completing the detail line, assign the freight charges to the items purchased. Proceed with the following steps:

Step 3: Assignment

Select the freight line and proceed with the following steps:

Click on 'Line' > Item charge Assignment
 
There are 2 methods to assign the freight charges:

1. Manually
Enter a value in the 'Qty to Assign' field until the 'Rem to Assign' is zero at the bottom of the screen.

2. Automatically
Functions >  Suggest Item Charge Assignment.

The options are as follows: Equally OR Amount
You can assign the freight charges equally to the item lines it relates to or it can be assigned to the item lines based upon the value for each item line (Pro rata calculation)

The 'Qty to Assign' will be populated based upon the option selected (Equally or Amount) and the freight value ($) will be reflected in the 'Amount Assigned' field.

Step 4: Escape to the Purchase invoice and proceed with posting the document.

Additional Notes:

Items with a costing metod of 'Standard' - won't be affetcted. Therefore make sure your standard cost for those items also include the freight portion.

Items with a costing metod other than 'Standard' will be changed in the item card. The field that will be affected will be the Unit Cost field - which will be increased by the freight allocated per item.

If the raw materials costing metod is for example FIFO, the BOM will use the unit cost which then includes the freight allocated.