Flow of Landed Cost Voucher

ERPNext Buying
1

How the extra costs are applied to each product?

I have done the following:

  1. Created a purchase receipt.
  2. Submit purchase receipt.
  3. Created a landed cost voucher to the purchase receipt and submitted.
  4. Created an Purchase Invoice from the Purchase Receipt and submitted.

After this, I go to one of the products and the Valuation Rate is the same, there is not a new price and the last purchase rate doesn’t have the extra costs placed on the Landed Cost Voucher…

Ps. I am using Perpetual Inventory

2

Ok I just found that since I am using Perpetual Inventory, the valuation is reflected on the Stock Ledger…

But how can I get that valuation on the Item DocType? Because every time someone need to see the latest cost will only see the cost without transportation, or if the see the valuation, they will only see 0.00, since that field is for other purposes.

3

If the valuation is only reflected in the Stock Ledger. then how does a new Production Order get the new valuation information to build products if the raw materials had LCV applied but it never updated the doctype?

This would really mess up the accounting for manufacturers because it means the actual value of their raw materials is not being picked up properly.

Am I missing something?

BKM

4

When you submit a Landed Cost Voucher, system update the additional cost in the related Purchase Receipt and update Valuation Rate considering additional cost. And this valuation rate is maintained in Stock Ledger Entry level.

In Item master, the valuation rate field is used to update opening stock or to handle the fallback. It does not get updated with the ongoing transactions. Last Purchase Rate is updated from PR / PI, but it also not as per valuation rate, it is based on actual purchase rate without additional cost.

5

I’ve been asking myself that question, what I managed to do is to have the valuation rate field appears only when opening stock has a value and I added another field in Item doctype that fetches the latest cost @bkm, that way when people take a view of the product they can see the cost right away.

…Maybe another for prices would be good, but since there are several price lists involve I should take a creative design approach to see how it could have a nice look.

6

How about you make some slight adjustments and look at the Stock Valuation for your costs. Rather than the Purchase Receipt or the Purchase Invoice.

It will be inaccurate to load up the cost on the Purchase Receipt, as you still owe your supplier only the base rate for the item.

I like the current approach, and all it takes is a bit of adjustment on part of the user.

Hope this helps.

Thanks

Jay

7

Hmm… Still not sure I get it.

If I have to use LCV with a purchase receipt, it will affect the valuation of the material, but how do I then get an accurate “Cost to Manufacture” when a large chunk of the value of the raw materials is built into the LCV;s that were added to the purchase receipt?

Normally I would use the Stock transaction “Manufacture” to see the value of the raw materials and then add the overhead costs to that.

Is there a better way that incorporates the total valuation of the raw materials (including the LCV’s)?

BKM

8

Raw materials are direct costs. There should be no indirect costs attached to that. Transport of raw (as an example) is also direct costs. LVC can help true up your cost of material to a certain degree.

Manufacturing has elements of indirect costs. That is where you get into cost accounting. Where you take 100% of your manufacturing costs (everything from flushing the toilet to plant manager’s bonus) and make it look “variable” by using ABC (activity based costing).

9

Not sure I agree. For example:

If you use raw aluminum ingot in your manufacturing process, you may have to source them from several locations.

  • If you get them from China, there will be a 30% tariff to get then into the country plus the broker fees, plus transport costs.

  • If you get them from another country AND they can be certified as from recycled sources, then there will be a 15% tariff, plus the foreign certification costs, plus the broker fees. plus the domestic recertification costs, and then transportation.

  • If you get them from a domestic smelter, you will have the material costs, plus transportation.

This process gets even more complicated if your raw materials fall under the scrutiny of the Environmental Protection Agency here in the US. In the case of much the chemicals used by my current client base they suffer through all of the myriad of tariffs, brokers, transport, and import charges plus EPA impound fees and EPA lot certification.

So, raw materials DO in fact have far more additional costs than you might imagine. All of this needs to be captured somewhere, and if LCV’s are not the mode of capture, then what is?

Sometimes it is weeks before all of this paperwork catches up to the delivered materials. If fines are levied anywhere along the way, then that has to get in there as well.

BKM

10

so what i was trying to say was the plant manager’s salary of the smelter should not be part of the direct. But all shipping could be part of direct costs. Inbound transport you should consider as direct. :slight_smile:

Now - what might be of interest to you is the concept of “standard costing”. Lots of big and small companies use it.

Might atleast be helpful if that solves what you are trying to achieve?

Cheers

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