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frank holland 2nd August 2004 09:07

Material surcharge
I have a question on cost price calculation in BaanIV.

A customer of mine would like to have a material surcharge on purchased material. However, they only want this surcharge when the material is issued for production, in other words, as part of manufactured items' costs, not as part of the purchased item's standard costs.

I set up the following test case:
- Purchased item A in the BOM of manufactured item B
- Purchased item A has an item group different from manufactured item B
- Purchased item A has a cost component different from manufactured item B
- I defined a surcharge by item group for manufactured item B,
with a material surcharge on the cost component of purchased item A

Such a material surcharge only works if you define it as a percentage of total costs, not as a percentage of additional costs, since these additional costs seem to be for operations costs only.

For a BOM with one level this works fine.

However, if manufactured item B is in the BOM of another item C with the same item group as B, the material surcharge on purchased material is applied twice.

Has anyone had this problem before?
Any creative ideas?

Thanks in advance,

Darren Phillips 3rd August 2004 23:47

could using a phanton do it.

put the purchased item as a component of a bom of a phantom item. put a surcharge on the phantom item using surcharge by item session and then add the phantom item to the manufactured item bom.

frank holland 4th August 2004 12:04

Hi Darren,

Thanks for your reply.

In my particular case your suggestion is not applicable, because the item you would define as a phantom may be a component that can be sold as a spare part as well.

For the same reason it is not possible to define a separate item group for finished products (manufactured items of the lowest BOM-level), and apply the surcharge to this item group only...


Paul P 8th August 2004 15:07

Hi, Frank,

Probably if you can give us a little "business" background, instead of just "technical" background of the requests, we may be able to help you a little better. Thanks


frank holland 9th August 2004 20:31

Hi Paul,

Here some more info on the business background of this problem.

The surcharge represents the usual overhead costs.

The customer does not want the surcharge to be part of a purchase items' cost price, because then:
- the inventory value of all purchase items would be higher than before
- the costs of goods sold (COGS) of these items would be higher than before.
The latter is important when purchase items are directly sold and not built-in in manufactured items. For such trading goods the material surcharge would be too high, since the overhead costs of trading good sales are lower than for the more complex manufactured parts.

I hope this helps !


Paul P 10th August 2004 15:23

Hi Frank,

Tricky situation, but I understand why the customer's asking for it. I can think of one way to do this, but it'd be a bit complicated (and maybe too tedious, depend on how you look at it). And that is to have a "production staging virtual warehouse" (you also may be able to use WIP warehouse feature in BaanERP) in between of their raw material warehouse and their shop floor, and assign surcharges specific to this virtual warehouse only. Then whenever goods are being sent to shop floor, they have to hop past this virtual warehouse first. Tedious, isn't it? But that's the only way I can think of achieving this

Of course you can also ask your finance consultant to lobby the client for "better" way of booking these costs :)


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